Derivatives growth outpaces equities

While equity volumes on Nasdaq Dubai see-saw, derivatives trading has seen phenomenal growth this year.

This month till date, the number of derivative contracts rose to 4,536 over February's 386 contracts, which had grown 329 per cent over January.

Analysts attribute this to key factors such as larger institutional participation and the hedging mechanism inherent in derivative products.

Mohammed Ali Yasin, Chief Executive of Shuaa Securities, which is one of the major institutional participants on Nasdaq Dubai, told Emirates Business: "Trading volumes have been increasing because of the larger role played by institutional investors, who account for most of the trading volume. The recently launched Dubai Gold Securities is doing very well. Moreover, the combination of futures and options gives such investors a wider scope for hedging."

The turnover in equity instruments listed on Nasdaq Dubai jumped in February but eased this month. Of the 19 participants on Nasdaq Dubai, Citigroup and HSBC have the lion's share in trading value.

In order to boost trading and facilitate local investment, Nasdaq Dubai has allowed dirham-denominated listings but no company has so far taken a decision in this regard.

"Our research showed dirham listings may appeal to some issuers who seek UAE investors, as these are accustomed to investing in dirhams on local UAE exchanges. Depa later secured shareholder approval to switch to dirhams, should the company's board decide to do so," said Jeff Singer, Chief Executive of Nasdaq Dubai.

Welcoming dirham listing, Yasin said: "Half of the investors are not happy trading in dollars as it involves exchange rate conversion that can increase the cost of trading. With dirhams, anyone can trade and the cost will be lower for retail investors."

Nasdaq Dubai has 19 equity instruments, 132 derivative contracts and 19 sukuk. The bourse's initiative to introduce Sunday trading in November has seen volumes on that day increase by more than double.

It has adopted a five-day trading week with Fridays and Saturdays designated no-trading days. The exchange said the decision has been taken to cater to the requirements of a growing number of participants. It was taken in consultion with members and other market participants.

"We took a series of steps to make it easier for individuals to access the exchange. The revised timings brought our market closer in line with the other GCC exchanges on which investors are active," Singer said.

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