x Abu Dhabi, UAEWednesday 26 July 2017

Abu Dhabi-based broker soars to $2bn daily trading

Abu Dhabi Sources, a new brokerage company in Abu Dhabi, has quietly risen up and started trading more than $2 billion worth of financial instruments and commodities a day.

A new brokerage company quietly founded in Abu Dhabi four months ago is already trading more than US$2 billion (Dh7.34bn) a day of financial instruments and commodities, says its top executive.

ADS Securities, the brokerage arm of the newly formed ADS Holding, has hired traders from across the world to take advantage of the four-hour "time-zone gap" between the time when Asian markets close and European markets open, said Mahmood al Mahmood, the chairman and chief executive of ADS Securities and the chief executive of the holding company.

"Historically capital has left from here to other markets because we see that most of the capabilities are in other markets," said Mr al Mahmood, a former Abu Dhabi Investment Authority executive who has also held positions at Al Qudra Holding and the Emirates Securities and Commodities Authority.

"We decided to come to the capital, to set up next door and try to work with the capital owners on a professional basis."

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ADS Securities will come up against such global trading houses as Glencore International, based in Switzerland, and Cargill, based in the US - two of the largest privately held companies in the world.

While ADS Holding has $500 million of paid-up capital, four-fifths of that is devoted to ADS Securities to enable it to place enough deposits with banks to make large-size trades.

In one year, ADS Securities is aiming to increase daily trade volumes to "the double digits" of billions, Mr al Mahmood said.

Offices are being set up in Singapore and London with the view that staffing could increase as high as 120 from its current level of 35.

The company is targeting local sovereign wealth funds and banks, but also global institutions to use its brokerage services. So far the team has traded foreign currencies and physical commodities.

Malek Kanawati, the chief executive of the online trading brokerage Mubasher, said the new company was "definitely different from those run-of-the-mill foreign exchange trading shops that have sprung up and gone away over the years".

The paid-up capital and staffing is many times more than the usual arrangement.

Still, the market is "very niche", he said, and whether or not the company will be a success "remains to be seen".

Within six months, the company plans to trade a broad range of financial products, including derivatives, money market instruments and oil.

As global economies increase their consumption of raw materials and supplies diminish, commodity prices have hit all-time highs. Silver prices reached a new high of $33.465 an ounce on Monday and copper broke a record at $10,190 a tonne last week. The larger holding company forms part of a strategy to be an active investor in the whole chain of commodities including logistics, infrastructure, production and processing. The abbreviation ADS stands for Abu Dhabi Sources.

"We basically decided to become an active, operating group in a field that is diversified from our classic asset classes," Mr al Mahmood said.

The founding of ADS Securities is part of major efforts to move Abu Dhabi towards becoming a trading hub, not just a source of investments, he said. Eventually, the company is likely to move to Sowwah Island to become a major tenant in the new financial centre there.

The company is owned by a group of private investors, primarily high-net-worth individuals and the private offices of wealthy families from the capital.

"Abu Dhabi is an ideal marketplace to link to global trade cycles all the way from the Far East to Europe," he said, adding the company was using its own trading system, called ADSS Trader, to offer its clients better spreads for trading.

The system boasted a rejection rate for trades of only about 3 per cent, compared with rates as high as 30 per cent on some other platforms, he said. Trades were taking place in about 100 milliseconds.

In a room next to Mr al Mahmood's office is a media centre that includes a wall of dozens of small screens that can show different feeds and television channels.

Mr al Mahmood has his own trading station as well, with a dozen screens. ADS Securities started out solely as a brokerage company, but it is studying the possibility of making its own trades in the future.

Staff at ADS Securities were recruited from major trading companies across 24 countries. The company has appointed as managing director Philippe Ghanem, the founder of the foreign exchange company Squared Financial Services in Dublin. The chief dealer is Peter Laursen, previously a top executive at Saxo Bank in Denmark.

 

bhope@thenational.ae