The Abu Dhabi Securities Exchange (ADX) hopes to have government and corporate debt issues available for trading by the end of the year. Once introduced, this will allow retail investors and institutions to buy and sell bonds that are issued by local companies and governments on the exchange. "We're now trying to co-ordinate the alignment of our listing rules to facilitate cross-listing of existing debt that are issued in New York and on the London Stock Exchange," said Elie Ghanem, the product development manager at the ADX.
"We will be ready to receive bonds to be listed on the exchange before the end of the year." At the moment, companies such as Aldar Properties, Dolphin Energy, Mubadala Development and National Bank of Abu Dhabi already have debt issued on the London Stock Exchange. "ADX will be introducing a new breed of investors" to trading debt, said Mohammed Ali Yasin, the chief executive of Shuaa Securities.
Those new investors will boost liquidity and lead to better pricing of those bonds, Mr Yasin said. About 90 per cent of the work on the regulations is already complete, Mr Ghanem said. ADX has been in close consultation with the exchange's regulator, the Emirates Securities and Commodities Authority. The exchange has also been in talks with government bodies and government-related entities to better understand their needs and learn from their previous experiences of listing debt.
The ADX said it was first important to implement standardised requirements that would incentivise debt issuers to list their notes and bonds on the exchange, as conflicting rules and regulations would make it difficult for them to report to more than one exchange and regulator. The second phase will involve the automatic cross-listing of any new debt issued from UAE Government entities. The ADX hopes in the long term all new debt issuances will be listed in Abu Dhabi. "If we have all the regulations in place and we're giving access to international brokers, international dealers and institutions, why would they go elsewhere to issue it?" Mr Ghanem said.
The ADX has listed bonds in the past and therefore has the technical infrastructure in place. But all previous bonds were convertible and linked to equity, so listing pure fixed-income debt will be a new step for the exchange. It already lists one convertible bond, which was issued by National Bank of Abu Dhabi. With the lack of liquidity on international markets, the financial industry in the region has been calling for a local debt market.
Most government debt and debt issuances from government-related entities, whether bonds or sukuk, are traded over the counter or on the London Stock Exchange. At the moment, banks are primary holders of debt in the UAE, generally trading the securities on behalf of institutions and high net worth individuals. When the ADX offers debt on the exchange, retail investors will be able to trade the bonds directly, which means that the units offered will be much smaller.