Futures trading on the ADI will raise the global profile of Abu Dhabi’s capital markets and encourage more foreign investment. The ADI has risen 70% in the last five years, tracking the performance of all its companies in sectors including telecommunication, financial services, real estate and energy. The index provides a benchmark of the overall performance of the ADX market which is the second largest in the GCC by market capitalisation and includes First Abu Dhabi Bank, Eshraq Properties and Etisalat among its listed companies.
The creation of index products is the latest expansion of Nasdaq Dubai’s futures market, which opened in September 2016 with single stock futures on leading UAE-listed companies.
Rashed Al Blooshi, Chief Executive of ADX, said: “By collaborating with Nasdaq Dubai in the launch of ADI futures we are encouraging not only investment into the futures themselves, but also into the equities market, as the flexibility provided by futures makes owning shares more appealing to many investors including large international funds. Futures on the ADI provide important support for the ADX’s strategic plan 2016-2020 which includes diversifying the investor base and increasing market capitalisation.”
ADI futures are useful tools for hedging ADX shareholdings as well as for investment. They enable investors to make gains when the index is falling as well as rising, and make use of leverage to magnify gains. Nasdaq Dubai offers two quarterly contracts in ADI futures, with SHUAA Capital acting as market maker to support liquidity.
Hamed Ali, Chief Executive of Nasdaq Dubai, said: “This collaboration between Nasdaq Dubai and ADX is the outcome of the significant synergies that have long existed between us, and we are exploring further product launches and other areas of cooperation. The trading of ADI futures on our market is an important initial step that supports the expansion and development of both Nasdaq Dubai and ADX to the benefit of regional and international investors. As one of the region’s largest stock markets with many leading Middle East companies among its listings, the ADX is an important partner for us.”
In October 2017 Nasdaq Dubai and ADX signed a Memorandum of Understanding to focus on broad collaboration and educational workshops.
More than 2.5 million contracts have been traded on Nasdaq Dubai’s futures market in single stock contracts, with a total value of more than 500 AED million. The market operates with eight leading UAE brokerages as Members and two active market makers. All ADX and Nasdaq Dubai brokerages can apply to be Members of the futures market. Nasdaq Dubai is in discussions with other regional and international financial institutions who wish to take part in trading or clearing on the market.
Nasdaq Dubai also launched futures today on Dubai Financial Market’s DFMGI index. Further expansion of Nasdaq Dubai’s futures market will include the creation of futures on regional MSCI equity indices under a licence agreement announced in October last year, as well as further more stock futures and option products.