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When financial headwinds force a lull in capital markets activity, an exchange must work to improve its infrastructure, expand its potential product range and strengthen its relationships with market participants. In 2011, NASDAQ Dubai was busy on all fronts. Its decision to transfer the Listing Authority to the Dubai Financial Services Authority (DFSA) streamlined the listing process, assisting issuers to put products on to the exchange in a timely manner. In addition the exchange prepared enhancements to its clearing and settling processes. It also laid the ground for an expansion of its debt and derivatives markets, expected to bear fruit in 2012. New Members came on board during the year and the exchange held major conferences attended by many of the most prominent companies in the UAE, at which the issues of why, how and when they might IPO were exhaustively discussed.

During the year NASDAQ Dubai strengthened its position as the only exchange that provides equally strong links to both regional and international investors. The outsourcing of trading and other functions to the systems of Dubai Financial Market (DFM), achieved in 2010, worked seamlessly throughout 2011, as shown by a rise in regional retail investors’ share of total traded value. International institutional investors accounted for the great majority of equities trading, as in previous years. The exchange’s close links with international central securities depositaries led to an increase in the value of Sukuk held in NASDAQ Dubai’s custody.

With the UAE on review for a potential MSCI upgrade from Frontier Market to Emerging Market status, NASDAQ Dubai is working with other UAE capital markets bodies to further improve clearing and settlement systems and make other enhancements to the national infrastructure. As economic growth in the UAE and the region leads the way to a recovery in investor sentiment, as it surely will, NASDAQ Dubai looks forward to playing a leading role in the revitalisation of the capital markets that will follow.

Trading

The value of equities traded on NASDAQ Dubai in 2011 fell 48% to 674 million dollars, compared to 1.31 billion dollars in 2010. The drop was in line with other exchanges in the region, reflecting the capital markets challenges experienced globally as a result of the eurozone crisis and regionally following the Arab spring. DP World, NASDAQ Dubai’s most heavily traded stock, carried out an additional listing on the London Stock Exchange (LSE) on 1 June 2011. Over the rest of the year, NASDAQ Dubai accounted for 93.5% of DP World’s traded value and the LSE 6.5%. For all of 2011, DP World ranked 4th by traded value of all DFM and NASDAQ Dubai stocks.

Individual investors accounted for 5.8 % of the traded value of all shares traded on NASDAQ Dubai in 2011, more than twice their share in the last quarter of 2010. The increase followed the outsourcing of NASDAQ Dubai’s trading, custody, clearing and settlement systems to DFM in July 2010, carried out in order to facilitate access by individual investors. The highest retail share of any single week of 2011 was 38%.

Infrastructure

NASDAQ Dubai transferred responsibility for maintaining the Official List of Securities to the DFSA in October 2011. As well as being in line with international best practice, this step streamlines the regulatory process for approving prospectuses and listing, enabling issuers to go to market swiftly. NASDAQ Dubai continues to be exclusively responsible for admitting securities to trading on its market and its role as an Authorised Market Institution, licensed to operate an exchange and clearing house, remains unchanged. This efficient regulatory structure enhances the attraction of NASDAQ Dubai as an international exchange able to compete effectively for regional listings with longer established exchanges such as the London Stock Exchange.

NASDAQ Dubai prepared for significant enhancements to its clearing and settlement processes during 2011, ahead of their implementation in January 2012. The improvements mirror changes put in place in 2011 by DFM. MSCI has commended the “seamless functioning” of its new system.

Members and Custodians

NASDAQ Dubai welcomed Bank of America Merrill Lynch as its first derivatives General Clearing Member in January 2011. National Bank of Abu Dhabi was approved as a derivatives Trading Member in October, raising the total number of Members able to trade derivatives to four. MENA Corp Financial Services joined as an equities Individual Clearing Member in May, bringing the total number of Members able to trade equities to 34. In September, Standard Chartered became the exchange’s seventh Custodian.

Further Expansion

NASDAQ Dubai engaged actively with its pipeline of potential equity issuers throughout 2011. In April it signed a Memorandum of Understanding with Economic Zones World (EZW), the parent company of Jafza, aimed at identifying companies in Jebel Ali Free Zone that could benefit from carrying out an IPO on the exchange. In October, NASDAQ Dubai and Jafza jointly held a capital markets conference that was attended by senior executives of prominent companies based in the free zone. These are active in sectors including trading, metals, materials, food, electronics, energy and power.



Jeff Singer speaks to Jafza companies about raising capital

Activities held jointly with DFM during the year included a conference on how Dubai-based companies can go public, and the advantages of doing so. The event was attended by leaders of major government-owned entities together with family businesses and capital markets advisory firms.



Ezza Kazim, Managing Director and CEO of DFM,
addresses the Going Public forum held with NASDAQ Dubai

As well as preparing to expand its equity market NASDAQ Dubai took steps to develop other sectors, in line with its strategy to lead capital markets growth in the region by drawing on the best elements of international practice and applying them to the needs of the Middle East. The value of Sukuk investments held for safekeeping in NASDAQ Dubai’s custody rose 36% over 2011. The increase reflected the wide range and competitive pricing of the exchange’s Central Securities Depository (CSD) services. These include settlement of over the counter cross-border transfers and processing of corporate actions. NASDAQ Dubai is the only exchange in the Middle East that has direct access to the International Central Securities Depositaries (ICSDs) Euroclear and Clearstream, providing an easy transaction process for international and regional investors. The exchange is the largest in the Middle East for Sukuk with a total nominal admitted value of 10.6 billion dollars. It aims to expand its services for Sukuk in 2012. NASDAQ Dubai devoted considerable resources in 2011 to preparing further development of its derivatives market. It has operated the UAE’s only on-exchange equity derivatives platform since 2008 and aims to build on this to offer new derivatives products to a wider range of market participants.

The exchange engaged frequently during the year with the DFM, the DFSA, the Dubai International Financial Centre and a wide range of UAE government entities, to examine ways to strengthen the UAE’s capital markets framework. NASDAQ Dubai looks forward to continuing these discussions and helping to implement the decisions that come out of them.

Jeff Singer
Chief Executive Officer

"NASDAQ Dubai looks forward to playing a leading role in the revitalisation of the capital markets"

Jeff Singer
Chief Executive Officer