The Dubai International Financial Exchange (DIFX) is planning to add derivatives of active stocks of the two UAE bourses by the end of the year, Emirates Business has learnt.
"First, it will begin with the listing of equity derivatives of active DIFX stocks such as DP World," said a broker who attended a presentation held by DIFX last week.
"This will then be extended to Dubai Financial Market (DFM) and Abu Dhabi Securities Exchange (ADX). But, the DIFX official told us that regulatory approval is still pending. They gave us a presentation of how stocks will be traded on the derivatives platform, which is likely to become operational by August," the broker said.
According to the DIFX website, it is preparing to launch a derivatives platform as part of its market of markets strategy, subject to regulatory approval from Dubai Financial Services Authority.
"For the first time in the UAE you will be able to protect your equity exposure using options and futures. The service will initially offer equity derivatives. Equity derivatives are extremely popular global trading instruments and are usually used as hedging tools," the website says. At present the lack of an equity derivatives exchange is obliging some locally based institutions to trade via the over-the-counter market. When contacted a DIFX official refused comment, saying regulatory approval is still awaited.
In finance, an equity derivative is a class of financial instruments whose value is at least partly derived from one or more underlying equity securities. Market participants trade equity derivatives in order to transfer or transform certain risks associated with the underlying security. Options are by far the most common equity derivatives, however, there are many other types that are actively traded.
Last August, the DIFX launched its TraX platform for structured products in conjunction with the listing of 14 products from Deutsche Bank, Merrill Lynch and Morgan Stanley. The move represents a significant advance for the development of listed investments in the Middle East, since the exchange is the only one in the region to offer structured products.
With the introduction of DIFX TraX, the number of products on the platform has grown to 23 and is set to grow further as more banks prepare to list structured products on the DIFX.
The listed products currently include capital-protected notes and index tracker certificates.
Three new sukuks were listed on the DIFX yesterday, bringing the total number listed to 18. Qatar-based Almana Group's Dh600m sukuk is the second dirham-denominated sukuk to list. The other two to list were Malaysia's Paka Capital ($550m) and Kuwait's Villamar Sukuk Company ($190m) .