Equity derivatives trading is set to increase in the Middle East’s largest financial centre, Dubai, as the Dubai Financial Market (DFM) reports that it has on-boarded five new margin trading members.
The country’s oldest bourse has been a pioneer in the domestic financial markets since inception fourteen years ago. The five new members bring the total number of brokers offering margin trading facilities to investors to twenty-four.
The multi-asset exchange is expanding its coverage of derivatives as investors look for more sophisticated trading instruments. The new brokerage firms joining the pact are Al Safwa Islamic Financial Services, Global for Shares & Bonds, Al Fardan Financial Services, Al Brooge Securities and Al-Sharhan Stock Center, all having been accredited to provide margin trading, lifting the total number of DFM brokerage firms providing this service to 24 companies.
Through the margin trading facility investors can place trades with lower deposit rates. As a qualified margin trading member, the exchange will allow brokers to accommodate the difference in opening and maintaing the position. The DFM is regulated by the country’s main financial watchdog, the Securities and Commodities Authority (SCA). Sources close to the matter have stated that additional brokerages will gain approval as margin trading members over the next six months.
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Emerging markets slumped last year after the FED’s tapering programme redirected funds back into developed markets. However, Dubai has been fortunate to benefit from a developing economy as the stock market was one of the best performing exchanges over the last 18 months. DFM stocks were up 50% in the first five months of the year.
Dubai and Derivatives
Financial derivatives have been slow to enter the frontier market; investors from the Middle East have been exposed to global markets since the new millennium when online trading first took shape. The local markets have adopted products that traders are commonly using in the margin FX and CFD markets.
Apart from equity derivatives, Dubai offers traders access to energy, currency and commodity futures and options. The Dubai Gold and Commodity Exchange was the country’s first commodities focused bourse, and was also the first exchange to launch offshore Indian rupee futures.
Dubai continues to attract international financial services firms in the broking, banking and insurance sectors. Its stringent regulatory framework, under the SCA and DIFC, enables firms to smoothly operate in the country. UK-based CFD provider, City Index, was the latest provider to establish a local presence.