ANALYSIS: Experts discuss role of Dubai, retail opportunity

In a panel discussion chaired by William Knottenbelt, consultant and executive coach at Sernova Financial, a panel of regional experts discussed the progress being made in Dubai and across the Middle East and North Africa (MENA).

Lily Chia, head of regional equity and FICC sales at Singapore Exchange, told the Derivia Intelligence Middle East conference: “I come to the MENA region about twice a year and I think I am going to have to come more often because each time we come we see more and more clients, questions and feedback.”

Chia said the Asian exchange will continue to focus on its core products in interest rates, where SGX re-entered the short-term interest rate market in August, and commodities where its iron ore contract in booming in Asia.

SGX had in October its busiest month of derivatives trading since March 2020, with the Asian exchange reporting a total of 29.5 million lots last month, up 54.5% on October last year, according to FOW Data.

Asked what role Asian and Middle Eastern markets have in a world where the US is far-larger and delivering good returns, Chia responded: “Diversification is the main tenet of investment 101. We thrive on that. We offer that alternative and that’s how a small player gets a niche. That is what will allow us to continue to be relevant.”

Narendra Hegde, senior vice president at Hong Kong Exchanges and Clearing, picked up on this theme in his comments: “With the advent of buy-side firms moving from multiple geographies to Dubai and Abu Dhabi, we see more interaction with these funds as they already trade our cash and derivatives markets. So we see more engagement with the region going forward.”

Hanish Jani, senior vice president at PhillipCapital India Pvt Ltd, the Indian arm of the Singapore-based broker, told the delegation Dubai is moving fast: “The needle is shifting constantly, with new businesses and new derivatives products coming in which are non-traditional in nature. We have seen an increasing shift towards multiple markets and instruments.”

Jani continued to say PhillipCapital takes an iterative approach to market coverage: “In each market that we go to we try to add one or two more jurisdictions. For example in India, we have a presence in Gift City which allows us to promote global portfolios so we manage portfolios there with access to the US markets and now we are adding other markets. The idea is to keep adding markets incrementally.”

Chia said the growth of the retail trading community particularly in the US is resonating around the world: “We have seen that a lot of the growth in exchanges has been from retail, even in the largest exchanges like the CME. I think a lot of the traditional institutional-focused exchanges are moving to retail, focusing on retail as the next growth engine. Chinese and Indian exchanges just blow the volume out the water with their huge retail clientele.”

She continued: “How do we address this segment of the market when this segment is not homogenous? There’s the self-directed investor, there is the punter, there is the – for want of a better word – gambler who wants a binary option that you can swipe left and right. So it’s not an easy market to attack.”

Chia added: “My view is that a lot of it is in the app. It the broker that is willing to invest and create a system, like a Robinhood that creates an easy-to-use system for the retail investor to trade without thinking too much.”

Hegde said the focus on retail is driving the development of new derivatives products: “I think going forward the focus will be more on the short-dated options, we will list more of the index short-dated options as well as weekly single stock options.”

Hong Kong Exchanges and Clearing reported in October its best month for derivatives trading volume, as total derivatives volume hit 45.8m lots, which was up 21.8% on the previous record of 37.6m contracts in March 2020, according to FOW Data.