The Middle East: A New Leader in Global FX Ecosystem?

The Middle East, a region that is home to some of the world’s fastest-growing economies, has become a top destination for FX and CFD brokers in the past 5 years. Dubai in particular witnessed a surge in popularity among financial services providers after the global financial crisis of 2008. Just in 2021, Dubai International Financial Center (DIFC), a special economic zone in Dubai, reported 996 company registrations, which is the highest level in the history of DIFC. The number was up by 36% compared to 2020.

A large part of the new company registrations at DIFC were financial brokers. Some of the world’s largest FX and CFD brokers now have their head office or at least regional office in Dubai. Due to its strategic location, Dubai as a financial center provides an opportunity for financial firms to expand their operations globally. Recently, FxPro announced the expansion of its presence in the Middle East through a new office in Dubai.

But, the Middle East is not only about Dubai or UAE. Countries like Bahrain and Jordan also introduced a technology-driven financial regulatory approach recently to attract leading financial firms around the world, including FX and CFD brokers.

“Other oil-rich countries in the MENA region, such as Kuwait and Bahrain, are also expected to experience accelerated growth along with Oman and Saudi Arabia making the Middle East, specifically the Gulf states, an attractive hub for global brokerages. On the back of oil-price windfalls, growth of economies in the Middle East and North Africa (MENA) region is expected to grow by 5.2% in 2022, the fastest rate since 2016, according to the World Bank’s recent report released in April 2022,” Mohamed Alahmad, Equiti Group’s Co-Founder and Managing Director for the MENA region, said.

FX Regulations

While other regions have struggled with a clear FX regulatory framework, most of the Middle Eastern countries, specifically UAE, Bahrain and Jordan have been able to find the right balance between protecting consumers and promoting innovative financial products in a secure environment.

"The sharp rise in the number of FX brokers over the past couple of years can be attributed to a few contributing factors. [Firstly, and most importantly], efforts to establish sophisticated market regulation that is on a par with global standards that serves to protect both FX brokers and traders have provided a more secure, attractive and enabling market environment," Alahmad said.

Alahmad mentioned that efficient management of COVID-19 and global events like World Expo 2020 have also attracted several investors to the region, including FX brokers.

Tax Rate & Adoption of New Technologies

Farah Mourad, XTB MENA’s Senior Market Analyst, said that the Middle East has transformed itself in the past few years due to the adoption of technology in different sectors. According to her, Dubai’s approach toward emerging financial trading products has made it possible for brokers to launch and expand their operations in the region.

“Dubai provides an ever-increasingly favorable environment for financial firms and a favorable legal and regulatory regime along with proper infrastructure. Another GCC member, Kuwait, built an advanced financial market with the highest valued currency in the world. This environment benefited the Forex market regulated by the CBK to offer different CFD products to its traders adhering to global standards for FX trading while benefiting from fewer restrictions,” Mourad said.

When we talk about strong economies, corporate tax rates across different countries in the Middle East region are among the lowest in the world. With special economic zones, Dubai has specifically gained popularity among firms willing to innovate in the financial services industry.

Entrepreneurs

Dubai has established itself as a hub for global entrepreneurs who are up for innovation. That’s why the region is not only popular among established players but also among those entrepreneurs who are planning to launch a startup focused on the FX and CFD industry.

“Many factors, in my opinion, are paving the way for the FX business to expand in the Middle East. I believe that the UAE is a destination for entrepreneurs because of its stability, services, diversity, equality and business opportunities. In the past two years, I've seen many financial brokers trying to secure their place in Dubai or in UAE,” Amr Masry, the Sales Director at Amana Capital told Finance Magnates.

With the rising number of FX and CFD brokers in the region coupled with the Middle East's technology-driven growth strategy for the coming years, it won't be a surprise to see more global brokerages selecting financial centers like Dubai as a top destination for international expansion.