Borse Dubai, the majority owner of Dubai's two stock exchanges, plans to integrate trading and clearing systems on the two bourses. But it would need to overcome significant regulatory hurdles before a full merger would be possible between NASDAQ Dubai and the Dubai Financial Market (DFM), according to Jeff Singer, the chief executive of NASDAQ Dubai.
"The owner is rightfully saying, 'Why do we have two trading systems instead of one, why do we have two back-up systems instead of one, and two clearing and two custody systems? We should bring all that together and make it one system,'" Mr Singer said. NASDAQ OMX, the world's largest exchange group, owns one third of NASDAQ Dubai. The exchange was founded in 2005 and is located in the Dubai International Financial Centre, a financial free zone regulated by the Dubai Financial Services Authority,
NASDAQ Dubai and the DFM, which was established in 2000, have different regulators. NASDAQ Dubai is based on global regulatory standards. For example, companies wanting to list do not require any local ownership and can fully repatriate their profits. As a result, NASDAQ Dubai is dominated by institutional investors and the DFM by retail investors. In November, NASDAQ Dubai launched 20 futures contracts on stocks listed in the UAE, enabling investors to sell short, which is prohibited in Islam. A short seller bets on the market to fall. He borrows stocks from a third party to repay them later.
"We can do things that our competitors can't, that other exchanges cannot do. That is why we exist, we have a very distinguishing business model and we have to preserve and maintain that," Mr Singer said. NASDAQ Dubai has struggled with low volumes and trading is dominated by DP World, the ports operator. The financial crisis and the resulting credit squeeze led many government-owned companies and others that had intended to list their shares on the exchange to review their plans.
Borse Dubai is a holding company established by the Dubai Government to invest in stock exchanges. It owns 22 per cent of both the London Stock Exchange and the Borsa Italiana in Milan. firstname.lastname@example.org