DFM and Dubai Mercantile Exchange partner to develop energy-related financial products

The Dubai Financial Market and Dubai Mercantile Exchange signed an agreement on Tuesday to jointly create financial products, particularly those that allow retail investors to tap into the GCC's oil industry. Both the exchanges will create a working group to develop investment opportunities related to the GCC's crude oil industry, the DFM said in a statement.

The Dubai bourse also plans to launch a retail product derived from the Oman Crude Oil Futures, a benchmark that trades on DME and is used by many Gulf producers to price their oil. The deal with DME will seek to introduce investment opportunities for retail investors in particular, said Hamed Ali, chief executive of DFM and Nasdaq Dubai.

“The agreement underlines the two exchanges’ commitment to identify synergies and potential opportunities, which ultimately strengthens Dubai’s position as a capital markets hub, in line with the leadership’s vision and the strategic plan to develop financial markets in Dubai.” DFM's latest move comes as Dubai seeks to boost its stock market and attract more listings in an effort to tap into a growing appetite for IPOs in the region. Last year, the emirate revealed plans to list 10 state-owned companies as part of its strategy to increase the size of the financial market. Currently dominated by financial services and real estate companies, the government is aiming to further diversify the sectors on DFM. Dubai approved a market maker fund worth Dh2 billion ($544.5 million) last year to encourage listings from sectors such as energy, logistics and retail.

As the first entity to be listed under the plan, Dubai Electricity and Water Authority, which is looking to raise as much as Dh7.96bn, is hoped to be an example for other energy firms to follow suit. The DFM is up about 37 per cent in the year to date. The recent agreement with DME “stems from both exchanges’ commitment to jointly implement Dubai’s strategy to develop financial markets and exchanges”, DFM said.

DME is a joint venture between the world’s largest futures exchange, Chicago Mercantile Exchange Group, as well as Dubai Holding, Oman Investment Fund and a number of banks and oil majors. It is based at the Dubai International Financial Centre.

Since its launch in 2007, DME has traded about 18 billion barrels of Oman crude oil. The DME Oman marker price is used by national oil companies in Oman, Dubai, Saudi Arabia, Kuwait and Bahrain to price more than 5.5 million barrels per day of Middle East crude oil.