ANALYSIS: Dubai booming as derivatives traders move in - panel

Speaking at the Derivia Intelligence Middle East conference in Dubai last week, a panel of trading experts said Dubai has benefited from a supportive regulator keen to attract more business to the City.

Erkut Ozer, business development executive at G.H. Financials, told the delegation: “The region has seen huge growth over the last five years. If we look at 2019 to 2023, foreign direct investment was around $112bn (£90bn). Dubai has moved from eighteenth to eighth in the foreign direct investment index and second in the emerging market index after China.”

Ozer added: “That’s been testament to the government and the infrastructure they have been putting in place in the capital markets, making it an attractive place to come to invest, to trade and to live.”

The G. H. Financials executive said firms are setting up in Dubai to trade both locally and outside the region.

“We are seeing a pro-business approach in the MENA (Middle East and North Africa) region and that is conducive to growth. The exchanges and the markets here, they are all growing. DGCX, GME have got products that are unique to themselves. Giving access to international markets has put Dubai in particular in the spotlight.”

The Gulf Mercantile Exchange, previously known as the Dubai Mercantile Exchange, traded 106, 400 lots of Oman crude oil in October, down slightly on a busy October last year, according to FOW Data.

The GME signed last week an agreement with data specialist Fastmarket to develop new commodity derivatives.

In June, Saudi exchange group Tadawul finalised its acquisition of share in Dubai Mercantile Exchange (DME), making it the joint largest shareholder with CME Group.

DME rebranded as GME in September to reflect the addition of Tadawul as a shareholder, saying the move reflected its “broadened vision” and commitment to the entire Gulf region’s energy and commodities markets.

Ozer said: “The exchange-traded space has seen an explosion in growth both locally as well as international firms having operations based out of this region.”

Sharif Jaghman, director of business execution and operations for Europe, Middle East and Africa at CME Group, told the delegation there has been an influx of capital from all over the world, including hedge funds moving into Dubai.

Jaghman said: “The region sits in the crossroads between Africa, Europe and Asia so people based here are well aligned to cover Asia hours but also continental Europe and, if they are keen, US hours. That is an advantage for people that want to set up a presence here.”

CME Group announced at the start of this month an open interest record in its largest natural gas contract driven partly by international adoption.

Ozer agreed that Dubai’s location is contributing to its success: “2024 has been an exciting year of growth, coming out of the MENA region as well. We are seeing an increase in uptick of enquiries and trading activity as a result. We see that trend continuing.”

He added: “For us, the access to markets is key. MENA as a whole is a growth area, we see it as a bridge connecting Europe, the Middle East and Asia. We see that trend continuing and we look forwards to being a part of that.”

As Dubai continues to mature, Jaghman sees the local retail trading community growing: “One segment worth keeping an eye on is retail. Retail investors or self-directed investors in the Middle East but also globally are becoming more sophisticated with the education and availability of tools.

“Exchanges have been becoming more innovative. For us at the CME Group, we have been bringing products designed for the retail community. Our micros across the six asset classes that we provide are designed for the retail investor,” said Jaghman.

Louis Hems, commercial director at Dubai Gold and Commodities Exchange, told the delegation: “It can only be a good thing that global exchanges and clearers are taking the region seriously because that is going to bring a lot more traders into the derivatives markets here and reduce the barriers to entry.”

DGCX, which trades currency, energy and metals futures contracts, traded 109,300 lots last month, down 64% on the same month last year, according to FIA data.