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Mideast equity derivatives market to expand this year
DUBAI — The Middle East equity derivatives market is set to expand this year as its gaining confidence of investors who see a growth potential in this segment following a strong economic recovery in the region, a survey said on Monday.
The region’s derivative market is likely to grow following rising interests of fund managers and Nasdaq Dubai will take the lead by expanding its product range and creating more public awareness about the advantages of equity derivatives.
According to 79 per cent of fund managers and brokers polled by NASDAQ Dubai, the Middle East’s equity derivatives will expand this year compared to last year’s levels. A total of 87 per cent described equity derivatives as useful tools for managing risk, while 72 per cent said their organisation was interested in learning more about the uses and benefits of equity derivatives.
A total of 93 per cent of respondents said that NASDAQ Dubai’s trading model provides useful protection against the risk of default by a counterparty, which can affect over-the-counter trades. NASDAQ Dubai operates a central clearing house which eliminates such risk.
The survey received responses from representatives of 40 fund managers and brokerage firms who attended the FOW Derivatives World Middle East conference in Dubai last month.
Jeff Singer, Chief Executive of NASDAQ Dubai, said: “The survey shows that investors are poised to make increasing use of the Middle East equity derivatives market, which is still in its infancy and has potential for rapid growth.
NASDAQ Dubai is the international financial exchange serving the region between Western Europe and East Asia. The exchange currently lists shares, derivatives, exchange-traded commodities, structured products, Sukuk (Islamic bonds) and conventional bonds.
“NASDAQ Dubai will continue to drive the development of the market forward, by expanding its product range and by educating finance professionals and the public about the advantages that equity derivatives offer,” Singer said.
NASDAQ Dubai launched the UAE’s only equity derivatives platform in November 2008. Trading volumes have expanded from 90 in January 2009 to several thousand every week by the end of the year.
The market currently consists of futures over 21 individual UAE stocks and over the FTSE NASDAQ Dubai UAE 20 index, which is well correlated with equity markets across the MENA region and offers significant hedging and investment possibilities.
Equities trading volumes on NASDAQ Dubai rose by 61 per cent in February 2010 to 322 million, compared to 200 million in January 2010. Volumes in February 2009 were 566 million. Citi was the most active member of the exchange by equities volume in February 2010, followed by HSBC and Deutsche Bank. Useful additions to NASDAQ Dubai’s equity derivatives market would include futures listed on other GCC individual stocks and equity indices, as well as equity options, respondents to the survey said.
— muzaffarrizvi@khaleejtimes.com
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