Dubai Bourse Changes Trading Session Structure Ahead Of MSCI Upgrade

Dubai Financial Market (DFM) will introduce a pre-closing period to its trading sessions from May 14 that will make closing prices more predictable and eliminate large last-minute swings, the bourse said on Sunday.

DFM said the move was timed to come ahead of the inclusion of the United Arab Emirates in the list of emerging markets by index compiler MSCI at the end of this month, which is expected to bring more foreign investors to the market.

Under the new rule, orders submitted within the last 10 minutes of trading, 1350 to 1400 local time (0950-1000 GMT), will accumulate for completion at closing.

The bourse did not explain how orders would then be executed, but a Dubai-based trader told Reuters the exchange would hold an auction where a single price is set for all trades using a matching algorithm. This becomes the closing price. Such a procedure is common practice internationally, the trader said.

The auction aims to match as many orders as possible but leaves out those made at extremely low or high prices.

The addition of the pre-closing session – which neighbouring Abu Dhabi’s exchange implemented last year – “eliminates (the) last trade price factor in case it was not sensible”, DFM, the emirate’s main stock exchange, said in a statement.

The rule will apply both to equity and debt securities.