Abu Dhabi, UAEMonday 24 June 2019

Nasdaq Dubai to partner with FTSE Russell for more derivatives offerings

The exchange looks to open up its sukuk platform for retail investors

Nasdaq Dubai today launched futures trading on FTSE Russell’s FTSE Saudi Arabia Index, which tracks 46 Saudi Arabia-listed companies. Courtesy: Nasdaq Dubai
Nasdaq Dubai today launched futures trading on FTSE Russell’s FTSE Saudi Arabia Index, which tracks 46 Saudi Arabia-listed companies. Courtesy: Nasdaq Dubai

Nasdaq Dubai, the first Arabian Gulf exchange to offer derivatives and futures trading, is partnering with the global index provider FTSE Russell on several new products including futures country specific indexes as it looks to expand its offerings and investor base, its chief executive said.

The exchange on Tuesday launched futures trading on FTSE Saudi Arabia Index, which tracks 46 companies listed in the kingdom. The latest offering is geared towards global and regional investors including funds that use the index as a benchmark for investing in Saudi Arabian equities.

“This is the beginning of a partnership between us and the FTSE Russell…. there will be a lot more products that will come out,” Nasdaq Dubai chief executive Hamed Ali told reporters in Dubai. “What FTSE and us are going to do is to look at different niches and also asset classes and [exchange] knowhow and intellectual capacity between the two teams.”

The FTSE move is part of Nasdaq Dubai’s plans for an equity derivatives market, covering the entire region. Saudi Arabia’s Tadawul stock exchange is the biggest and most heavily traded Arab bourse, with a market capitalisation of about half a trillion dollars.

“This is the starting point and we have a great partnership developing with Nasdaq Dubai and we are looking at how we can work with them on other products,” Waqas Samad, chief executive of FTSE Russell told reporters. “We will continue the dialogue with them [Nasdaq Dubai] to see what else we can do in the region,” he said when asked if FTSE plans to launch futures on other country specific indices.

“This region is very important to us … we see this an area where we can grow significantly,” Mr Samad added.

Both Mr Samad and Mr Ali didn't provide timelines for introducing new products.

Saudi Arabia will be entering into FTSE Russell Emerging Index in March through a five-phase inclusion process and the index provider expects it to account for about 3 per cent of the gauge.

“When you look at the size of the market its impact on the emerging market index … we estimate [investment inflows of] about $6 billion (Dh22bn) into the Saudi market," Mr Samad said.

Investors with about $200bn in assets or so passively track FTSE's emerging market index.

Nasdaq Dubai has aggressively expanded its offerings as it aims to attract liquidity and bring on board new investors, which have about 75 and 25 per cent split in favour of institutional and retail investors, respectively. Other assets classes, including equities, bonds, real estate investment trusts, and sukuk and other Islamic products are already trading on the bourse.

The exchange, the world’s biggest in terms of value of listed sukuk, will be looking at Islamic finance as an asset class for new products along with FTSE and will also explore options of new products relevant to other markets within the broader Middle East region, Mr Ali said.

“Our primary focus will be how to enrich the achievement [of being the largest sukuk exchange] and how can we develop the market and add more tools and utilities that are relevant to Sharia products,” Mr Ali said.

“Within the next few weeks the teams will be able to short-list which direction in terms of asset classes we would like to go.”

The plans include opening up the sukuk market for retail investors and Nasdaq Dubai is already looking at different ways and frameworks to achieve the objective, which will be a milestone for the bourse, he noted.

Within the first seven weeks of 2019, Nasdaq Dubai has listed single stock futures on some of the largest equities in Saudi Arabia, which has helped the exchange nearly triple volumes and record a three-fold jump in average daily trading value this year compared to the whole of 2018.

Nasdaq Dubai’s average daily trading value was $262,246 in 2018 and so far this year the bourse has recorded $737,962, according to exchange data.

The exchange, which is engaged in discussions with UAE-based firms and companies from broader region on initial public offerings, earlier this year also launched UAE MSCI index, which reflects its “heavy commitment to derivatives,", Mr Ali said.

Updated: February 26, 2019 07:39 PM