Dubai Gold and Commodities Exchange (DGCX) has ventured into equity futures trading, allowing UAE investors to become shareholders of world’s top brands from the US and India.
The exchange on Tuesday announced that it offered UAE investors an opportunity to invest in 15 equity futures including five from the US and 10 from India. They’re Apple, Google, Facebook, Microsoft, JP Morgan, Tata Motors, Reliance, HDFC Bank, Axis Bank, Infosys, TCS, Maruti, Tata Motors, ICICI Bank, Larson & Toubro and State Bank of India.
Amrit Sahi, Head of Equity Products at DGCX, said future contracts would be based on underlying single stocks, hence giving local exposure to international equity futures markets.
Set to be settled in cash based on the closing price of the underlying security, the contracts will track underlying price performance that they’re based on.
The exchange, he said, could increase its equity futures offerings to 50-100 by the end of this year by including European and Far Eastern, depending on the demand from the investors.
Sahi said: “Investors doesn’t get any voting rights or dividends and being future contracts, they’re traded on margin (offer leverage). They’re also not subject to the short selling limitations that stocks are subjected to. Single stock futures can be physically settled or cash settled.”
Globally, stock futures contracts are traded on exchanges in India, Russia, US, Europe and Korea. Dubai bourse, however, is the first bourse in the Middle East to introduce this in the region.
A UAE bank had earlier launched a fund whereby giving local investors an opportunity to expand their portfolio to the US and European equities.
Sahi said local investors wouldn’t have to remit the money abroad while they trade futures on international stocks because DGCX is government owned and has its own clearing system.
“Additionally, we offer competitive cost structure and zero tax on returns.”
DGCX started trading equity futures on January 15 and has seen good response since then. More than 2,400 contracts were traded in the first seven trading days.
DGCX CEO Gaurang Desai said: “People are sitting on high amount of cash but they don’t get avenues for trade and new DGCX platform will give them an opportunity to expand their portfolio and reduce the risk.”