Why the DIFX launch on September 26 will be very welcome

The recent correction in GCC bourses has shown a lack of transparency and openness to manipulation that a properly regulated regional bourse will be able to address.

For those caught up in the correction phase of GCC stock markets this summer, the launch of a new regional stock exchange based in Dubai will come too late.

But for years the financial community has complained about the lack of transparency and illiquid nature of Gulf capital markets. The Dubai International Financial Exchange, which will launch on September 26, is the Dubai Government's response, and a bold move to shift the focus of regional finance to Dubai from Bahrain.

This follows on from the recent establishment of the Dubai International Financial Centre, which is drawing financial institutions to Dubai whose regulatory structure is now to English-language global standards rather than to Arabic Sharia law as in Bahrain.

The Dubai International Financial Exchange will allow the cross-listing of shares from the region and the world, provided that the listing requirements of the exchange are met. There will be nothing extraordinary about these requirement, they will be to global standards. But the most important thing is that share trading at the DIFX will be open to all, GCC nationals, expatriates and foreigners.

So for the first time a truly open and transparent financial market for share trading will be available in the Middle East. This is expected to become a magnet for firms looking to list in a part of the world with enormous capital reserves and to raise capital in this region.

Alongside the DIFX and its regulatory infrastructure will quickly develop the usual panoply of financial firms and institutions, the brokers, lawyers, investment bankers, right down to the essential swanky restaurants for business lunches.

But why should this happen in the UAE and not another GCC State? Well, for a start Dubai has taken up the challenge and made the commitment of time, energy and money. The UAE is also an exceptionally rich country, and has a long track record of openness and hospitality towards foreigners which not all GCC countries can claim.

To some extent the DIFC and its markets, of which the DIFX is to be the first, is a logical development of the UAE's role as a regional trading and business hub. This is the 'Jebel Ali Free Zone' of the banking and financial world, and pre-eminence in trading and finance does rather go together.
Moreover, Dubai has a reputation for delivering major projects to global standards and seeing the projects it starts to successful completion. The emirate is not about to abandon the DIFC or DIFX whatever happens in the start-up years.

Indeed, the DIFX will surely be seen as a beacon of hope against the backdrop of the obvious inadequacies of the existing stock markets. The fact that the latter have just gone into a bearish, correction phase will probably aid the launch of a new exchange whose most bitter rivals are not likely to put up much of a fight.

Overall, the DIFX marks a new chapter in the history of Gulf financial markets and will be a welcome addition to the region, just at a point when many investors will be loosing confidence in the existing capital markets. Applications for listing are open now.