Nasdaq Dubai has added National Bank of Abu Dhabi (NBAD), Dubai Financial Market (DFM) and Dubai Investments (DIC) to its roster of single-stock equity futures. The new additions mean there will be 12 companies on which investors can trade futures contracts.

The three firms, which includes NBAD the largest banking entity in the UAE, join nine other leading UAE-listed companies: Emaar Properties, DXB Entertainments, Abu Dhabi Commercial Bank, Aldar Properties, Arabtec Holding, DP World, Dubai Islamic Bank, Etisalat and Union Properties.

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As an expanding and liquid exchange with a broad international investor base, Nasdaq Dubai provides attractive opportunities to make markets in a variety of securities. Market making services on the new futures contracts are provided by SHUAA Capital (DFM: SHUAA), a Dubai-based financial services provider, which has been market making on all futures together with Arqaam Capital, EFG Hermes, Mena Corp Financial Services and Mubasher Financial Services, since the market opened on September 2016.

Lack of experience

The lack of listed equity derivatives in the UAE was prompting investors to ask international investment banks to design over-the-counter options for individual stocks. As such, trading in listed futures and options are much more transparent, allowing the local bourse and UAE regulators to monitor derivatives activity affecting local stocks.

In addition, Nasdaq Dubai plans to expand its offerings in the future to include other derivatives products, such futures on shares listed on MENA and international markets as well as options.

Although the introduction of the futures exchange was a major development in the region, but there could be also some hurdles to overcome before Nasdaq Dubai could perform this kind of function. The challenges are clearly highlighted in the experience of the Nasdaq Dubai market, which operated until recently mainly as a thriving market for sukuk and other debt trading.

The Gulf region in general falls behind the pace of other emerging markets in formalizing the regulatory and operational aspects of derivatives markets’ microstructures. With the exception of Kuwait, the region’s equity markets have been slow to introduce futures and options.

Hedge and leverage opportunities

Nasdaq Dubai launched its equity derivatives market in November 2008 but this coincided with the global financial crisis, so the trading failed to gain critical mass.

Hamed Ali, Chief Executive of Nasdaq Dubai, commented: “The addition of three more prominent UAE companies, whose equities are widely traded, adds further depth and breadth to our futures market as a growing range of investors make use of the opportunities it provides for hedging and investment. As the market expands further in coming weeks and months, including the addition of equity indices, investors will be able to make increasing use of the benefits of leverage, and the capacity to make gains when underlying shares are falling as well as rising.”

Jassim Alseddiqi, Chairman of SHUAA Capital, said: “SHUAA Capital is proud to see the UAE’s burgeoning futures market enter the second phase of its development. Our provision of market making services for three more blue chip corporate entities will provide a significant boost to Nasdaq Dubai’s futures offering, enabling investors to benefit from an increasingly broad range of opportunities. SHUAA Capital’s expertise, experience and resources are playing a key role in the ongoing development of the UAE’s capital markets, and we look forward to working with Nasdaq Dubai and its constituent companies over the coming months to continue enhancing and expanding the emirate’s and the UAE’s investment landscape.”