Further consolidation among exchanges: DFSA

Following the outsourcing of Nasdaq Dubai back office operations for equity to Dubai Financial Market (DFM) last year, the Dubai Financial Services Authority (DFSA) said today that “further consolidation among UAE exchanges has become more probable.”

While acknowledging that “trading activity remains at relatively low levels” for Nasdaq Dubai, the DFSA, the regulatory authority for the Dubai International Financial Centre (DIFC), maintained in its business plan for the next two years that “publicly available reports indicate that a study has been commissioned on the possible merging of DFM and Abu Dhabi Exchange (ADX).”

It also reckons that the UAE exchanges could attract greater foreign investment this year thanks to Emirates Securities and Commodities Authority (SCA) introducing mandatory corporate governance guidelines for firms listed on those exchanges, coupled with the possible MSCI upgrading of UAE markets to ‘emerging markets’ in mid-2011.

The DFSA also announced that “despite the strained economic and financial conditions in the Emirate,” the number of authorised firms in the DIFC grew throughout the global financial crisis.

This, the DFSA attributed to “the Centre’s role as a hub for the region, whose economic performance was relatively robust during the crisis.” Despite the number of withdrawals staying stubbornly high at 38 in 2010 (40 in 2009), the number of authorised firms in the DIFC grew to 250 in 2010, up from 213 in 2009.

“The number of withdrawals did increase sharply in 2009 and remained elevated in 2010, though in both years withdrawals were more than offset by new authorised firms,” the DFSA said.

“Most of the withdrawals were concentrated among smaller regional firms. As of end-2010, there were 250 authorised firms in the DIFC, including seven representative offices,” it said, adding that the authority expects stringer growth this year.

“Stronger growth in firm population is anticipated in 2011 though there is greater uncertainty for 2012. Increased applications are expected to be supported by the reinforcement of Dubai’s role as a preferred hub for GCC and MENA region activity, improvements to our regulatory regime (e.g. the revised funds regime), regulatory uncertainty in other jurisdictions and the quality of life offered in the emirate.

The expansion in numbers is, however, likely to be more moderate than immediately prior to the crisis. This is in keeping with the growing maturity of the centre.”

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