Nasdaq Dubai to open equities futures market

The Nasdaq Dubai exchange will open an equity futures market next month to trade single-stock futures on the shares of some of the United Arab Emirates’ biggest companies, the bourse’s chief executive said on Monday.

The introduction of stock futures could be a major development for equity markets in the UAE, where short-selling is restricted and a lack of opportunities to hedge has been a concern of foreign investors.

“The futures market will provide opportunities to hedge or leverage on the underlying market. We saw a gap in the market and think there is good demand,” Hamed Ahmed Ali said in a telephone interview.

With the exception of Kuwait, Gulf Arab stock markets have been slow to introduce futures and options. Nasdaq Dubai originally launched equity derivatives in 2008 but this coincided with the global financial crisis and trading failed to gain critical mass; activity petered out after 2011.

Since then, however, UAE bourses have attracted more foreign money. International index compiler upgraded the UAE to emerging market status from frontier market in May 2014.

The lack of listed equity derivatives in the UAE has prompted investors to ask international investment banks to design over-the-counter options for individual stocks, industry sources said.

Standardised futures listed on Nasdaq Dubai would be cheaper to trade and more transparent, giving investors a clearer idea of price direction and letting the local bourse and UAE regulators monitor derivatives activity affecting local stocks.

From Sept. 1, Nasdaq Dubai will initially trade futures –agreements to buy or sell shares at an agreed price on a future date — in 10 UAE stocks which accounted for about 55 percent of the traded value of all listed equities in the country.

The 10 stocks are Aldar Properties, Arabtec, DAMAC Properties, DP World, Dubai Islamic Bank, Dubai Parks and Resorts, Emaar Properties, Etisalat, First Gulf Bank and Union Properties.

Futures contracts will have maturities of one, two or three months and be settled in cash. Each contract will provide exposure to 100 underlying shares, with Shuaa Capital providing market-making services.

Ali said Nasdaq Dubai aimed eventually to develop futures based on UAE stock indexes as well as single-stock futures on shares of other countries in the region.