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Kazim's move of consolidating markets is, however, not representative of the GCC. New exchanges were mushrooming during the last decade. The DFM and the Abu Dhabi Securities Exchange (ADX) started operations in 2000. In September 2005, the Nasdaq Dubai (former DIFX) began trading. "Together with the three non-Arabic markets there are 18 stock exchanges in the Middle East", says Jeff Singer, CEO of Nasdaq Dubai.
"Our aim is to become the leading market complying with international standards." Gulf stock markets surged by more than $117bn (Dhs430bn) to some $681bn during a rollercoaster 2009. Saudi Arabia's Tadawul market remains the largest exchange with a free-float adjusted market cap of $327bn, according to Fahd Iqbal, Vice President Equity Research at EFG Hermes in Dubai.
Nasdaq Dubai's market weight, however, is still insignificantly low and only three out of 14 listed securities are traded on a daily basis. Singer hopes that with the DFM's help, the Nasdaq Dubai will attract more IPOs than as a standalone exchange.
The Nasdaq Dubai's history is one of unlucky market timings. Launched in September 2005 under the label DIFX, the GCC markets underwent a crash in 2006, pulling the DFM Index down 46% and Saudi Arabia's Tadawul market by 52%. During the first year of his tenure, DIFX's German CEO Steffen Schubert aimed to attract 16 IPOs, "as the ADX did during its first year in 2000". But in fact he only attracted two primaries. Then the launch of the Nasdaq Dubai followed in November 2008, deeply within the financial crisis when primary markets dried up globally.
A decade of new markets
Dubai also witnessed the creation of the commodity-futures exchange Dubai Gold and Commodities Exchange (DGCX) in 2005, which is part of the Dubai Multi Commodities Exchange DMCC. The DMCC is today a market place for trading tea, cotton, rubber and diamonds, among others. "The Dubai Diamond Exchange is big success. Dubai is constantly luring away market players from Antwerp, the traditional diamond hub in Europe", diamond guru Martin Rapaport told AMEinfo.com.
Oil futures have been traded at the Dubai Mercantile Exchange DME since June 2007. The DME reported a 58% year-on-year increase in DME Oman Oil average daily volumes during 2009, averaging at 2,012 contracts. As the Nasdaq Dubai, the DME is governed by the DFSA, which is the regulatory body of the Dubai International Financial Centre (DIFC).
At a first glance, the fashion for establishing trading various platforms has positive effects. Capital is provided by institutional and private investors through markets, rather than by loans and bonds which are still the main sources of financing infrastructure projects in the Middle East. Other spillover effects are a growing culture of taking risks, the education of modern financial instruments to new generations and a growing competition between listed firms, leading to production efficiency and product innovation.
Small exchanges and split liquidity
The trend of setting up new markets applies to the economies outside the GCC too.
Gérard Al-Fil, Financial Journalist
