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12 July 2024

ADX to list ETF in April, start trading derivatives this year

Healy said regulations governing derivatives are approved. (EB FILE)

By Nadim Kawach

The Abu Dhabi Securities Exchange (ADX) would list its first exchange-traded fund (ETF) in April within a long-term strategy to diversify investments and turn itself into a global market, its Chief Executive Tom Healy said.

But Healy said he believed the UAE bourses would not recover from one of their worst periods unless global markets begin to improve and banking liquidity returns to its pre-crisis levels.

He also expected ADX to begin trading in derivatives before the end of this year. Relevant procedures and regulations have almost been completed, he told Emirates Business at the Abu Dhabi Economic Forum.

"The first ETF will be listed in April. I am not sure it will be in early or late April because it depends on the bank which will list this ETF… We will start with one ETF, which belongs to a local bank. I don't have many details about this fund because it belongs to that bank, which I don't want to identify now," he said.

"As for how many ETFs we expect this year, I think that in terms of domestic ones, we could have three or four during 2009, depending on the market and whether it will begin to improve… The first one will be around next month," Healy added.

In an interview with this newspaper last month, ADX Deputy Chief Executive and Director of Operations, Rashed Al Baloushi, said the rules are ready for launching ETFs and that authorities have approved the dealing mechanism.

But he added that ADX had delayed the plan for ETF listing to launch a programme to educate investors on such funds. He said the Exchange does not want to rush in introducing these sophisticated but secure instruments.

Healy said, "As for derivatives, we are still sticking to the plan to introduce them around the end of this year depending of course on market developments… Regulations governing these tools are ready and approved."

Asked about his expectations about the performance of ADX and other markets in the UAE, Healy said he did not see any real improvement unless global markets begin to recover and the bank liquidity problem is resolved.

"As for the UAE markets, they could start recovering once world markets recover… All this depends on the world… If there is no recovery in world markets, no market here is going to recover," he said.

"It is also a problem of banking liquidity…as you know, liquidity has dried up and bank liquidity is the only major source of liquidity for markets," Healy said adding "What is happening in such a situation is that dealers and investors are taking their investments out of the stock markets to get liquidity… If that continues, I don't think any market will recover… So, if the global markets remain very poor, ours will remain very poor."

About transparency in ADX, Healy said it had greatly improved over the past period following regulations issued by the Exchange in this regard.

"Transparency has improved significantly…in ADX, transparency quality is now quite good and getting better," he said.

What is ETF?

ETF is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold. Its main features are:

- Combine portfolio characteristics of an open-ended mutual fund with the liquidity and tradability of a listed equity share

- Traded on a stock market

- Track indices or asset classes

- Priced throughout the trading day

- Open-ended tracking funds