Performance Highlights

February

  • New share link enables Egyptian investors to trade easily on Nasdaq Dubai through MCDR
  • Nasdaq Dubai streamlines route for Egyptian brokerages to connect to its market
  • Integrated Securities joins exchange as Member trading equities
  • Nasdaq Dubai holds Investor Relations workshop in Cairo

March

  • APICORP rings market-opening bell to celebrate listing a Sukuk

April

  • Nasdaq Dubai welcomes designation as National Numbering Agency for financial instruments in DIFC
  • Nasdaq Dubai welcomes listing of two Sukuk from the government of Indonesia
  • DFM and Nasdaq Dubai launch Annual Trading Game for students
  • Dubai Islamic Bank lists Sukuk
  • Islamic Corporation for the Development of the Private Sector rings market bell to celebrate listing a Sukuk

June

  • Kuwait’s Boubyan Bank rings market-opening bell to celebrate listing a Sukuk
  • Emirates Islamic rings market-opening bell to celebrate listing a Sukuk
  • DP World rings market-opening bell to celebrate listing a Sukuk

July

  • Noor Bank rings bell to celebrate listing a Sukuk

August

  • Beltone of Egypt starts market-making in Orascom Construction shares on Nasdaq Dubai

September

  • Nasdaq Dubai opens equity futures market on shares of seven leading UAE-listed companies
  • Nasdaq Dubai and market participants celebrate launch of futures market with market-opening bellceremony
  • Emirates Islamic lists Sukuk
  • Emaar Properties lists Sukuk

October

  • Majid Al Futtaim rings market-opening bell to celebrate listing a bond
  • Nasdaq Dubai and IdealRatings launch benchmark indices to track performance of Sukuk
  • Nasdaq Dubai expands equity futures market by adding two more leading companies

November

  • Sharjah Islamic Bank rings market-opening bell to celebrate listing Sukuk
  • China Construction Bank rings market-opening bell to celebrate listing a bond
  • Industrial and Commercial Bank of China rings market-opening bell to celebrate listing a bond
  • National Bank of Abu Dhabi becomes market maker for equity futures
  • Ahli United Bank rings market opening bell to celebrate listing a Sukuk
  • Equity futures trading increases rapidly as new investors join market

December

  • Islamic Development Bank lists Sukuk
  • Nasdaq Dubai and Amman Stock Exchange sign MoU on mutual cooperation

Capital Admitted

Equities Traded Chart

No. Of Listings

Equities Traded Chart

Equities Trading

  Value (USD) Volume (shares) No. of trades
2016 1.243 billion 138 million 22,913
2015 1.368 billion 219 million 30,637
2014 1.447 billion 280 million 24,698
Equities Traded Chart

FTSE NASDAQ DUBAI UAE 20 INDEX

The index rose 7.0% over the year, from 3,063 at the end of 2015 to 3,294 at the end of 2016. It tracks 20 liquid stocks listed on DFM, the Abu Dhabi Securities Exchange and Nasdaq Dubai.

FTSE Chart

MEMBERS’ MARKET SHARE BY VALUE OF
EQUITIES TRADED, 2016

Most active 10 members by % traded value

Member % Traded Value
EFG-Hermes Brokerage 61.38
Mubasher 15.43
Arqaam Securities 10.95
Menacorp 2.57
Emirates NBD Securities 2.51
Deutsche Bank  2.01
Al Ramz Capital 1.54
NBAD Securities 0.85
SHUAA Capital 0.77
ADCB Securities 0.7

Equity Futures Traded Value

Equities Traded Chart

Equity Futures Traded Contracts

Equities Traded Chart


Market launched September 1, 2016


MEMBERS’ MARKET SHARE BY VALUE OF
EQUITY FUTURES TRADED, 2016

Most active 3 members by % traded value (excluding market maker)

Member % Traded Value
Menacorp 61%
Al Ramz Capital 30%
Al Safwa Mubasher 9%

SUKUK LISTINGS

Issuer Month Value (USD)
APICORP January 500 million
Government of Sharjah January 500 million
Islamic Development Bank March 1.5 billion
Government of Indonesia March 1.75 billion  
Government of Indonesia March 750 million
Dubai Islamic Bank March 500 million
Islamic Corporation for Development of Private Sector April 300 million
Boubyan Bank May 250 million
Emirates Islamic June 750 million
DP World June 1.2 billion
Noor Bank June 500 million
Emirates Islamic September 250 million
Sharjah Islamic Bank September 500 million
Emaar Properties September 750 million
Ahli United October 200 million
Islamic Development Bank December 1.25 billion
Total   11.45 billion

BOND LISTINGS

Issuer Month Value (USD)
Industrial and Commercial Bank of China June 400 million
Majid Al Futtaim July 300 million
China Construction Bank October 600 million 
Total  1.3 billion

The international framework provided by Nasdaq Dubai, as well as its close links to investors in its region and beyond, give China Construction Bank excellent visibility as we raise our profile across the Middle East.

Yuan Shengrui, Senior Executive Officer of DIFC Branch of China Construction Bank

Chairman's Message

Abdul Wahed Al Fahim

ABDUL WAHED AL FAHIM
Chairman, Nasdaq Dubai

Dubai’s traditional leadership in developing the region’s capital markets showed fresh vigour in 2016. The successful opening of Nasdaq Dubai’s equity futures market was a milestone that has transformed the investment landscape by offering investors new tools for increasing and preserving wealth. Even more significant than the launch of the market itself is the mindset that lies behind it. Nasdaq Dubai thinks long term, is committed to introducing new investment architecture that benefits issuers and investors across its region and globally and does not shy away from the challenges that come with being a pioneer.  We aim not merely to succeed in the existing marketplace but to create a new marketplace that is more sophisticated and larger, with greater variety and more customers.

Nasdaq Dubai will carry this commitment into 2017 and beyond in its equities, derivatives, sukuk and bond markets as well as others. We look forward to bringing new developments to the region’s financial markets that will make a lasting contribution to growth and prosperity.

Business Review

by

Hamed Ali

HAMED ALI
Chief Executive Officer, Nasdaq Dubai

With strong support from many of the UAE’s leading brokerages, Nasdaq Dubai opened a futures market on the shares of prominent UAE-listed companies on September 1. This seminal event followed many months and indeed years of planning. It was rewarded by rapid growth in the market as soon as it launched, as investors took advantage of the new opportunities it gave them. Such a warm reception was a welcome validation of the detailed research and analysis that Nasdaq Dubai conducted before setting up the market, which showed enormous demand for such products that was not being met by any other exchange.

We were active on many other fronts as well during the year. A notable achievement was the continued growth of our Sukuk market, which consolidated its stature as the world’s largest by listed value. Of the 16 Sukuk that we attracted during 2016, eight were from UAE issuers and 8 came from overseas, demonstrating our appeal as a truly global market that is also rooted in our own region.  Two of our three conventional bond listings during the year came from leading Chinese banks, strengthening an important relationship with a nation that we expect to playing a growing role in the future growth of the exchange.

Our equities market showed impressive resilience over the year, with traded value similar to 2015 in a volatile international climate. Steps taken to ease access to our equities platform for both issuers and investors from Egypt have laid the groundwork for fruitful activity in coming years, as has an agreement signed with the Amman Stock Exchange to look at possibilities for dual listings from Jordan. Our Murabaha platform, a unique Islamic financing platform that we launched in 2014, continued to grow quickly during the year.

Futures

The market opened in September with 1-month, 2-month and 3-month futures on the shares of seven companies that are listed on Nasdaq Dubai, Dubai Financial Market (DFM) or Abu Dhabi Securities Exchange (ADX): Aldar Properties, Arabtec Holding, DP World, Dubai Islamic Bank, DXB Entertainments, Emaar Properties, and Etisalat. These are among the best known and most heavily traded companies in the UAE. In October we added Abu Dhabi Commercial Bank and Union Properties to the market, further expanding its appeal to investors. The futures launch partners were SHUAA Capital, Al Ramz Capital, Arqaam Capital, EFG Hermes, Integrated Securities, Mena Corp Financial Services and Mubasher Financial Services.

SHUAA Capital provided market making services as soon as the market launched, supplying a crucial element of the platform’s infrastructure. The other partners were instrumental in connecting a wide range of investors to the new market.  

Opening Futures Market
Celebrating the opening of the futures market: Abdul Wahed Al Fahim, Chairman of Nasdaq Dubai, said: “Supported by the participation of many of the UAE’s leading financial services firms, Nasdaq Dubai is the only exchange that offers futures on shares of UAE-listed companies including some of the region’s largest and most successful businesses with operations around the world.”

Trading began at once and built up steadily. After reaching AED 4 million in September, traded value reached AED 28 million in October before growing to AED 43 million in November and AED 44 million in December.  Traded contracts, each representing 100 shares, expanded from 15,000 in September to 103,000 in October and 222,000 in November followed by 191,000 in December. The most active brokers during the four-month period were Menacorp, with a 61% market share, followed by Al Ramz Capital with 30% and Mubasher with 9%. At the end of the year National Bank of Abu Dhabi was preparing to start market making on the futures market, adding further depth for the benefit of investors.

The benefits of the futures market include hedging existing share portfolios, as well as enabling investors to make gains when share prices are falling as well as rising. These tools were not available before and have brought a new dimension to the UAE’s capital markets that should prove attractive to both existing and new investors. The possibilities of maximized gains through leverage are another significant feature.

The rapid growth of the futures market owes much to a campaign of education and awareness conducted by the exchange, through Nasdaq Dubai Academy, and the brokerages who are taking part in the market.  Initiatives included workshops for brokers and investors, as well as an equity and futures trading game played by students that attracted more than 2,300 participants from 26 educational institutions. Nasdaq Dubai will expand such initiatives in tandem with its plans to further develop the market itself by adding futures on more UAE and MENA-listed companies, as well as equity index futures and options. 

Sukuk and Bonds

Nasdaq Dubai listed 16 Sukuk with a total nominal value of 11.45 billion US dollars during 2016, maintaining its position as the largest exchange in the world for Sukuk listings.  Total current listed value rose to 43.9 billion US dollars by the end of the year, up from 34.1 billion US dollars at the end of 2015. Listings came from a variety of issuers ranging from multilateral lenders to publicly owned banks and companies in the transport, infrastructure and property sectors. Nasdaq Dubai is delighted to support their capital raising initiatives for the benefit of their business activities and their investors.

The first Sukuk listing of the year was a 500 million US dollar issuance by the multilateral Arab development bank APICORP, followed later in January by a listing from the Government of Sharjah also of 500 million US dollars. In March the Islamic Development Bank listed a 1.5 billion US dollar Sukuk, and the same month the government of Indonesia brought two Sukuk to the exchange valued at 750 million US dollar and 1.75 billion US dollars. Following its 2015 listings, this brought Indonesia’s total Sukuk listings on Nasdaq Dubai to 9 billion US dollars.  Later in March Dubai Islamic Bank listed a 500 million US dollar Sukuk.

April brought the listing of a 300 million US dollar Sukuk by Islamic Corporation for the Development of the Private Sector, which raised the funds to provide financing and investment for private enterprise projects in its member countries. In May Nasdaq Dubai strengthened its links with Kuwait’s capital markets through a 250 million US dollar listing by Boubyan Bank. Three prominent UAE companies listed Sukuk in June – Emirates Islamic with a 750 million US dollar issuance, DP World with 1.2 billion US dollars and Noor Bank with 500 million US dollars. 

Emirates Islamic Bell Ringing Ceremony
Market-opening bell ceremony: Hesham Abdulla Al Qassim, Chairman of Emirates Islamic and Vice Chairman and Managing Director of Emirates NBD Group, said “Emirates Islamic has been one of the fastest-growing banks in the UAE in recent years and we will use the funding raised by the Sukuk to help drive our strategy of expansion across our business activities.”

Emirates Islamic returned to the market with another Sukuk listing of 250 million US dollars in September. Sharjah Islamic Bank listed a 500 million US dollar issuance the same month, followed by Emaar Properties with 750 million US dollars. 

Kuwait’s Ahli United Bank listed a 200 million US dollar Sukuk in October and in December Islamic Bank listed its second Sukuk of the year of 1.25 billion US dollars, bringing the total  Sukuk listings on the exchange issued by the Saudi-based multilateral lender to 8.55 billion US dollars.

Al Ahli Bell Ringing Ceremony
Richard Groves, CEO of Ahli United Bank Kuwait, said: "Nasdaq Dubai’s platform strengthens our links with a wide range of regional and international markets in a respected listing environment regulated to international standards.”

As it further develops its Sukuk market, Nasdaq Dubai is committed to supporting the sector in a variety of ways apart from listings. In October the exchange announced a partnership with IdealRatings which launched benchmark indices that track the performance of global Sukuk, in order to provide investors with new data to make informed trading decisions. The data includes daily movements in price and total return, with monthly updates on yield and other key indicators, across a universe of more than 1,800 Sukuk.

IdealRatings Sukuk Index Announcement
A welcome message for the partnership with IdealRatings on the Nasdaq Tower in Times Square, New York

Industrial and Commercial Bank of China (ICBC) listed the exchange’s first conventional bond of the year in June with a 400 million US dollar offering. It was the second bond that ICBC has brought to the exchange following a 500 million US dollar listing in 2015, underlining the growing financial relationship between Dubai and China. Majid Al Futaim listed a 300 million US dollar bond in July. Then in October China Construction Bank listed a 600 million US dollar bond, in the largest single debt listing so far on the exchange by a Chinese bank.   

As part of the support that the exchange provides to its issuers, many of the Sukuk and bond listings during the year were marked by bell ceremonies at which senior representatives of issuers opened Nasdaq Dubai’s market. Attendees included His Excellency Essa Kazim, Governor of Dubai International Financial Centre (DIFC), Secretary General of DIEDC, Chairman of Borse Dubai and Dubai Financial Market (DFM) and a Board Director of Nasdaq Dubai, as well as Abdul Wahed Al Fahim, Chairman of Nasdaq Dubai, together with senior executives from Nasdaq Dubai, DFM and DIEDC.

Equities

The 7% rise in 2016 of the FTSE Nasdaq Dubai UAE 20 index reflected robust investor confidence in the UAE’s share markets in challenging global conditions.  The index, which  tracks 20 liquid stocks listed on Nasdaq Dubai, DFM and ADX, ended the year at 3,294. Traded value on Nasdaq Dubai was 1.24 billion US dollars, down 9% from 2015 in a year when some other regional exchanges experienced larger declines. Nasdaq Dubai continues to benefit from its diverse range of issuer companies and regional and international investor base. An example of this international reach came in February when the exchange announced a new share link facilitated by Misr for Central Clearing, Depository and Registry (MCDR) for Egyptian investors to trade on its market. This was followed by measures taken by the exchange to streamline the process for Egyptian brokers to connect to its market. In October, Beltone Market Maker announced it had begun making a market in shares of Egypt’s Orascom Construction, whose primary listing is on Nasdaq Dubai. Nasdaq Dubai and Amman Stock Exchange signed an MOU in December on cooperation possibilities, including dual listings of Jordanian companies.

Integrated Securities, a subsidiary of Abu Dhabi Financial Group, also became an equities Member during the year. The most active broker on the exchange by equities traded value in 2016 was EFG-Hermes, followed by Mubasher and Arqaam Securities.

Murabaha Platform

Transactions on Nasdaq Dubai’s Murabaha platform for Islamic financing increased by 34% in 2016 to 24.0 billion USD dollars, up from 17.9 billion US dollars in 2015. The platform is used by banks and other financial institutions on behalf of individual as well as corporate clients. Established through a joint initiative with Emirates Islamic in 2014, the platform’s rapid growth reflects its ability to facilitate streamlined Sharia’a-compliant financing activities. It offers substantial advantages over traditional Murabaha channels, utilising Sharia’a-compliant Certificates that are traded in Nasdaq Dubai’s Central Securities Depository (CSD) and based on Wakala investments such as Sukuk. As well as providing Sharia’a certainty for individuals and institutions, the transactions can take place in minutes and are executed at a fixed price with no spread.

Academy

Nasdaq Dubai Academy delivered 38 training courses during the year, providing expert instruction in financial markets topics to more than 500 individuals, including employees of more than 50 companies. Topics ranged from Financial Communications Masterclass, Corporate Governance and Advanced Sukuk, to Islamic Trade Finance Products, Asset Liability Management, Islamic Asset Management Products and training for CISI’s Islamic Finance Qualification (IFQ) exam. Customised courses were offered to the broker community on topics such as Equity Futures, Anti-Money Laundering, Credit Risk Management and Capital Markets. The Academy also certified 9 individual brokers from 7 Member firms as Trading Managers able to trade on the exchange. 

Corporate Governance

This section provides an overview of Nasdaq Dubai’s governance during the year 2016. It explains how the Company applies principles of sound corporate governance to ensure an environment of strategic direction, performance, accountability and control in the business.

BOARD OF DIRECTORS

At the foundation of a well governed company is an effective Board that provides good leadership and oversight, within a framework of prudent and effective controls that enable risk to be assessed and managed.

The Nasdaq Dubai Board is committed to the highest standards of corporate governance and business integrity.

The Nasdaq Dubai Board represents and acts on behalf of its shareholders, Dubai Financial Market and Borse Dubai, and is committed to strong corporate governance policies, practices and procedures designed to make the Board more effective in exercising its oversight role for achieving the Company’s strategic objectives and for the stewardship of the Company’s resources.  The Board adopts the view that corporate governance should promote good performance and integrity as well as conformance with legislation and that effective governance practices enhance the Company’s ability to achieve its strategy and long-term success.

While the Board does not have responsibility for day to day management of the company, it stays informed about the company’s business and provides guidance to company management through periodic meetings and other interactions. In accordance with good governance practice, the roles of Chairman and Chief Executive are distinct and separate with a clear division of responsibilities. This separation of roles promotes more effective communication channels for the Board to express its views on Management. The Chairman presides over meetings and is responsible for the running and leadership of the Board and ensuring its effectiveness. The Chief Executive has delegated authority from and is responsible to the Board for managing the Company’s business. We believe that this separation of roles and allocation of distinct responsibilities to each role facilitates communication between senior management and the full Board about issues such as corporate governance, succession planning, executive compensation and company performance.

The Board has adopted a formal schedule of matters specifically reserved for its decision-making, which includes the annual budget, strategy and long term business objectives, major projects and contracts and significant capital expenditure. The Board has created three Committees to ensure effective and efficient Board operations in accordance with their respective Charters.

During the financial year, the Board met on 4 occasions in person in Dubai. The Board has continued to oversee the Group’s strategy, risk framework and financial performance. The Board uses Nasdaq’s online board portal, Directors Desk for its meetings that make the board process efficient and has the benefit of considerable savings in resources, paper and printing.

The Nasdaq Dubai Board comprises 7 Non-Executive Directors including the Chairman, Abdul Wahed Al Fahim. Biographical details of the Directors and the Committees on which they serve are set out below.  The biographies demonstrate a wide range of experience and skills, including leadership and knowledge of corporate governance requirements and practices, enabling the Board members to discharge their responsibilities and to bring independent judgment on matters of strategy, performance and standards of conduct which are important to the success of the exchange. 

BOARD CHARTER
Nasdaq Dubai’s governance framework is set out in its Board Charter.  The Charter details the corporate governance framework, coordinates and aligns supporting policy documents and establishes an environment that enables the Board and officers of Nasdaq Dubai to meet their responsibilities under the prevailing law and to demonstrate good governance practices.
NON-EXECUTIVE DIRECTORS / INDEPENDENCE

In accordance with Dubai Financial Services Authority (DFSA)  Authorised Market Institution regulation and the Articles of Association,  a sufficient number of Board members should  be  Independent Non-Executive Directors.  The Non-Executive Directors, four of whom are Independent, bring wide and varied commercial experience to the deliberations of the Board and its Committees. 

An assessment of Directors’ independence is carried out on an ongoing basis and at appointment for new Directors. Each Director discloses their status i.e. independent or connected and has the opportunity to disclose changes in external directorships and other potential conflicts of interest. The Board ensures that there are sufficient number of Independent members at all times. The assessment was reviewed by the Nomination and Remuneration Committee and its recommendations were made to the Board for its approval.

A third of the Non-Executive Directors are subject to annual re-election by the shareholders at the Annual General Meeting.  In relation to Board remuneration, they receive an annual retainer together with meeting attendance fees for Board and, where applicable, Committee meetings.

BOARD ATTENDANCE
  Board Audit & Risk Management Market Oversight Nomination & Remuneration
No. of Meetings: 4 4 4 4
Abdul Wahed Al Fahim 4 of 4 4 of 4 4 of 4 4 of 4
Edward Knight 4 of 4   4 of 4  
H.E. Essa Kazim 4 of 4      
George Möller 4 of 4 4 of 4  4 of 4  
Jamal Nasser Lootah 3 of 4 3 of 4   3 of 4
Majid Saif Al Ghurair 1 of 4      
Rashid Al Shamsi 4 of 4     4 of 4
BOARD COMMITTEES

Board Committees play an important role in the governance process and assist the Board in discharging its duties. 

The standing Committees of the Board include: the Audit and Risk Management Committee, the Market Oversight Committee and the Nomination and Remuneration Committee. The Chair of each Committee reports to the Board on actions taken at each meeting. Each Committee has the authority to retain independent advisers. Each Committee has its own Charter, providing written terms of reference that define its authorities, duties and membership.  In line with good practice, membership of the Committees is entirely non-executive and the majority are independent Directors.

AUDIT AND RISK MANAGEMENT COMMITTEE

The Audit and Risk Management Committee is chaired by Jamal Nasser Lootah. The other members are Abdul Wahed Al Fahim and George Möller. The company secretary acts as secretary to the Committee. The Committee is responsible for the independent and objective oversight of internal control and risk management, internal compliance, governance issues, financial reporting, external and internal auditors and financial controls.

During the year, the Committee met on 4 occasions.  The Committee reviewed the annual budget, regular finance reports and the annual financial statements. The Committee recommended the annual budget and the annual financial statements to the Board for approval. The Committee met with the independent auditors, PricewaterhouseCoopers, to consider the results of the annual audit and to review the annual financial statements. The Committee reviewed the risk management reports from the Head of Market Operations and Risk and approved the Money Laundering Reporting Officer’s annual report. The Committee reviewed and approved the procedure for setting margin rates for equity futures. The Internal Audit function, which is provided by Dubai Financial Market, met regularly with the Committee which received the Annual Internal Audit Plan, progress on Internal Audit together with the Internal Audit reports following the completion of each audit. 

MARKET OVERSIGHT COMMITTEE

The Market Oversight Committee is chaired by George Möller. The other members are Abdul Wahed Al Fahim and Edward Knight. The company secretary acts as secretary to the Committee. The Committee is responsible for the independent oversight of Market Regulation which includes Issuer & Market Surveillance and  Anti Money Laundering & Compliance functions. It also supervises the regulatory functions carried out by other areas of Nasdaq Dubai, including the application of the exchange’s Rules, Members' conduct of business and the clearing and settlement function.

During the year, the Committee met on 4 occasions.  The Committee met on each occasion with Market Regulation and received updates on regulatory and compliance matters, including feedback on regular meetings with the DFSA.   The Committee also received reports on any market incidents as part of its regulatory oversight function. The Committee reviewed and recommended for Board approval the extension of term of Practitioner Committee members.  The Committee discussed and received updates on the application for CCP recognition to the European Securities and Markets Authority and various Jurisdictional Assessments.  The Committee received the annual audit report for the Nasdaq Dubai Company Announcements and News Disclosure System. The Committee reviewed the annual budget and resources for Market Regulation. 

NOMINATION AND REMUNERATION COMMITTEE

The Nomination and Remuneration Committee is chaired by Rashid Al Shamsi. The other members are Abdul Wahed Al Fahim and Jamal Nasser Lootah. The company secretary acts as secretary to the Committee. The Committee is responsible for new appointments to the Board, succession planning for the Board and executive management, and reviewing the independence of Directors. It is also responsible for recommending Non-Executive Directors remuneration for Board approval, approving performance measures and target setting for the Chief Executive and broad policies and programs for employee benefits.

During the year, the Committee met on 4 occasions. The Committee reviewed and recommended for Board approval amendments to the Human Capital Policy and program for employee benefits. It reviewed Director Independence, the Human Capital annual budget and set the targets and objectives for the Chief Executive.  The Committee received regular reports from Human Capital on key matters.

INTERNAL CONTROL AND RISK MANAGEMENT

Internal control aims to ensure that processes are in place to achieve a company’s business objectives. Internal audit provides assurances that these processes and controls are effective and being complied with. Through risk management, the company is able to identify, understand and manage risks to the business by reducing the probability that those corporate objectives are jeopardised by unforeseen events.

INTERNAL CONTROL

The Board has overall responsibility for ensuring that Management maintains an effective system of internal control and for reviewing its effectiveness. Such a system is designed to support the identification and management of risks affecting Nasdaq Dubai and the business environment in which it operates. Nasdaq Dubai operates a system of internal control which provides reasonable assurance of effective and efficient operations covering all controls, including financial and operational controls and compliance with laws and regulations. Processes are in place for identifying, evaluating and managing the significant risks facing the exchange. The Board, through the Audit and Risk Management Committee, regularly reviews these processes. The effectiveness of controls is periodically reviewed within the business areas. Regular reports are made to the Audit and Risk Management Committee by Management, Internal Audit, Head of Risk Management and Head of Compliance covering matters such as financial controls, compliance and operational controls. The Audit and Risk Management Committee monitors resolution of any identified control issues of significance through to a satisfactory conclusion.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. In accordance with International Financial Reporting Standards (IFRS), the internal control over financial reporting is a process designed under the supervision of the Chief Executive and the Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes.

Nasdaq Dubai’s internal control over financial reporting includes policies and procedures to provide for the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS and that receipts and expenditures are being made only in accordance with authorisations of Management and the Board; and provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

Management assesses the effectiveness of internal controls to satisfy itself that the processes followed are effective. The system of internal financial and operational controls is also subject to regulatory oversight by the DFSA.

INTERNAL AUDIT

The purpose of the Internal Audit function is to assist the Board and Management in the effective discharge of their fiduciary and administrative responsibilities by providing independent, objective assurance and consulting services with respect to evaluating risk management, control, and governance process. To ensure independence and objectivity, Internal Audit reports directly to the Audit and Risk Management Committee. The Internal Audit function adopts standards issued by the Institute of Internal Audit (IIA). Internal Audit services are provided by Dubai Financial Market which follows a risk based audit approach. An annual risk based internal audit plan is prepared based on risk factors with input from Management and other stakeholders. All key areas subject to high risk are included in the plan while the non-priority and low risk areas are excluded. During the planning process key business areas and operational risks are identified, compiled, risk rated and ranked to draw a final risk assessed audit scope of work that factors in high and medium risk areas. The audit plan, submitted to the Audit and Risk Management Committee for approval, provides information about the risk assessment, the current order of priority of audit projects and how they are to be carried out. The audit plan outlines the key departments, activities and processes to audit together with an estimate of resource requirements, and estimated start dates and completion timelines. The Internal Audit submits regular activity reports to the Audit and Risk Management Committee and Management summarizing the results of the audit assignment including significant risk exposures and control issues and follow up on the issues raised in the audit report. Internal Audit liaises regularly with internal stakeholders to maintain and uphold communication and relationship to a high level. The key internal stakeholders include compliance, company secretariat and risk management functions.

RISK MANAGEMENT

Risk management is a systematic and continuous process which aims to identify, evaluate, manage, control and report significant risks to which Nasdaq Dubai may be exposed. The Board has overall responsibility for the risk management framework and for ensuring that management maintains an adequate system of internal control appropriate for the Group’s business and the risks to which it is exposed. The Audit Committee and the Risk Committee assist the Board in discharging this responsibility by reviewing and assessing the Group’s risk framework, systems of internal controls and risk management process and for determining compliance with the DFSA Rules on Risk Management.

Nasdaq Dubai’s Management has day today responsibility for: (i) identifying risks and assessing them in relation to Nasdaq Dubai’ s strategies and objectives, (ii) implementing suitable risk mitigation plans, processes and controls and (iii) appropriately managing risks in a manner that complies with the DFSA Rules and serves the best interests of Nasdaq Dubai, its stakeholders. Nasdaq Dubai regularly reviews risks for materiality and refers significant risks to the Audit Committee and the Risk Committee.

The Risk Officer oversees the implementation of the Risk Management Framework (RMF). The RMF consists of three components:

  1. Risk Policy (the ‘Policy’) – a statement of the overall intentions and direction of Nasdaq Dubai related to risk management in accordance with a defined set of principles;
  2. Risk Plan (the ‘Plan’) - which include relationships, accountabilities, resources, risk measurement guidelines, processes and activities which provides details and direction to ensure that the objectives of the Policy are met; and
  3. Risk Procedures (the ‘Procedures’) - which include risk registers, detailed processes and practices at a departmental level

The Policy and Plan are approved by the Nasdaq Dubai Audit & Risk Management Committee (ARMC) and overseen by the Nasdaq Dubai Risk Officer, who has been assessed by the DFSA.  In development of this Policy, Nasdaq Dubai is mindful of the requirements of Chapter 5 of the Authorised Market Institution’s Module of the DFSA Rules, the ISOCO Principle 3: Framework for the comprehensive management of risks within the  ‘Principles for Financial Market Infrastructures (“FMI”) – April 2012’ which states ‘An FMI should have a sound risk-management framework for comprehensively managing legal, credit, liquidity, operational, and other risks’. 

The Policy Objectives are:

  • To confirm and communicate Nasdaq Dubai’s commitment to risk management to assist in achieving its strategic and operational goals and objectives.
  • To formalise and communicate a consistent approach to managing risk for all Exchange activities and to establish a reporting protocol.
  • To assign accountability to all staff and encourage the proactive management of risks within their areas of control. To provide a commitment to staff that risk management is a core management capability.

Procedures are developed at departmental level to ensure compliance with the Policy and Plan and consist of documented stand-alone processes or specific actions embedded into existing operational processes. The functions and systems for internal control and internal audit are part of the overall risk management process.

Nasdaq Dubai’s Exchange, Clearing and Central Securities Depository operations place significant emphasis on managing risk, including business continuity and default management. Nasdaq Dubai’s RMF is subject to specific regulation and supervision by the DFSA. In operating a Clearing House Nasdaq Dubai acts as the Central Counterparty (CCP) to transactions executed on the Exchange between Member firms. As a CCP, Nasdaq Dubai is exposed to various clearing related risks, including Counterparty Risk, Credit Risk and Liquidity Risk. The Head of Market Operations, in consultation with the Risk Officer, is responsible for implementing the Board’s strategy for monitoring, managing and mitigating these risks.  One primary risk management tool is the requirement placed on Clearing Members to provide margin payments and collateral to Nasdaq Dubai in accordance it Business Rules. In addition to the collateralisation of obligations, other risk management tools adopted by the Board include rigorous Clearing Membership standards, dedicated clearing capital, netting arrangements and advanced risk management monitoring techniques.

CORPORATE RESPONSIBILITY

Corporate responsibility has become embedded in the mainstream of corporate governance thinking. Nasdaq Dubai is committed to the highest ethical standards of professional conduct and integrity. The Board continues to ensure that we adhere to good governance principles and practices. In order to meet this objective, employees are required to comply with the spirit and letter of the company’s Code of Ethics and Conduct.  Our people are at the heart of what we do and drive the success of our business. Attracting, developing and retaining the skills we need to deliver on our strategy is important to Nasdaq Dubai.

From an economic and social perspective, Nasdaq Dubai enables companies to access funds for growth and development. Due to the nature of its business, Nasdaq Dubai does not have a high environmental impact. Its principal impact arises from energy, paper and water consumption. In an effort to responsibly manage this impact, we encourage a reduction in energy wastage and focus on recycling.

In order to take advantage of technology and the benefits of the internet, Nasdaq Dubai continues to publish its Annual Review online. This provides convenient access to information about the Company and reduces our consumption of paper in line with our corporate responsibilities.

- Corporate Responsibiliy -

Nasdaq Dubai is committed to the highest ethical standards of professional conduct and integrity. In order to meet this objective, employees are required to comply with the spirit and letter of the company’s Code of Ethics and Conduct.