Dubai: Offshore Business Sectors
Dubai International Finance Exchange
The Dubai International Financial Exchange (DIFX) opened for trading for the first time on Monday 26th September, 2005.
The launch of the first truly international stock exchange located between Western Europe and East Asia took place at a ceremony at the Dubai International Financial Centre (DIFC), where the DIFX is located.
The stated aim of the DIFX was to become the leading exchange in its region for equities, bonds, funds, Islamic products and other securities, and a gateway for international and regional investment.
It is the first exchange in the region that has been created to list securities from many different countries. UAE companies are able to list shares on the DIFX by setting up a holding company in the DIFC. Companies seeking listings on the exchange must have a minimum market capitalisation of US$50 million.
The exchange is additionally regulated in such a way as to allow companies which list on it to determine the portion of shares that they want to offer to the investing public. The current UAE lower listing limit is 25%.
A UAE federal bylaw passed in August 2007 permits DIFC holding companies to own companies operating in the UAE - provided that the holding companies abide by UAE Commercial Companies Law, including the requirement that no less than 51% of a UAE company remains UAE or GCC national-owned.
The DIFX market opened with the listing of five Deutsche Bank securities. These are index tracking certificates, which cover the US S&P 500, the German DAX 30, the Japanese Nikkei 225, the EuroStoxx 50 and the Stoxx 50.
The DIFX opened with four member banks – CSFB ( Europe) Ltd, Deutsche Bank AG, HSBC Bank plc and UBS AG. In 2007, it had 19 member banks.
In June 2006, the Dubai Financial Services Authority amended the rules which apply to sponsors of Reporting Entities which have listed securities on the Dubai International Financial Exchange.
The rule change now provides the DFSA with the discretion to require a company listing securities on the DIFX to appoint a compliance adviser to assist it with ongoing obligations under the DIFC Markets Law and Offered Securities Rules.
One of the primary obligations of a Reporting Entity is the requirement to continuously disclose price sensitive information to the market, in a timely manner.
In August 2006, a Memorandum of Understanding (MoU) was signed between Bahrain Stock Exchange (BSE) and Dubai International Financial Exchange (DIFX) to develop and strengthen capital markets activity in the region.
The MoU aimed at strengthening and increasing cooperation between both parties in areas relating to exchange of expertise and information.
In December 2006, it emerged that the Dubai International Financial Exchange (DIFX) had been accepted as a correspondent member of the World Federation of Exchanges, the leading international body promoting the interests of securities markets.
Correspondent status is the first step towards full membership of the Federation, which groups most of the world’s leading exchanges. The Federation’s activities include lobbying public authorities on behalf of exchanges, hosting conferences and collating industry statistics.
In June 2006 the DIFX was admitted as an affiliate member of the International Organisation of Securities Commissions (IOSCO), another leading international body that promotes high standards amongst regulators and stock exchanges.
In August 2007, the Dubai Government announced the consolidation of its holdings in the Dubai Financial Market (DFM) and Dubai International Financial Exchange (DIFX) into a new holding company, Borse Dubai.
The government stated at the time that the move was in line with the Dubai Strategic Plan 2015, and demonstrated its commitment to position Dubai as the leading capital market in the region.
DIFX and DFM continue to be regulated by the Dubai Financial Services Authority (DFSA) and the Emirates Securities and Commodities Authority (ESCA) respectively.
Explaining the role of Borse Dubai within the new structure, DFM Chairman Essa Kazim, who was appointed as the Chairman of Borse Dubai, said that the company is intended to be a facilitator, allowing DIFX and DFM to explore joint opportunities for the development of capital markets in the region and in the broader context of global exchanges. He commented at the time of the annoucement that:
"Both exchanges will share best practices, maintaining operational efficiency at international standards. Borse Dubai will boost confidence among issuers, investors, and intermediaries who will benefit from a presence in both exchanges, as well as a broader and more varied range of services."
The DIFX has ambitions to become the exchange of choice for the listing of Islamic finance instruments, and took major steps towards this goal with the listing of over 100 Sukuks, or Islamic bonds, in 2007. In fact, as 2007 drew to a close, the DIFX was already the largest exchange in the world for Sukuk by listed value, at US$13.78 billion.
In October 2007, the DIFX announced that it was preparing to list a range of Islamic structured products that will offer investors new Shariah-compliant opportunities on a new platform known as TraX.
The DIFX rebranded its market as NASDAQ Dubai, effective from November 18, 2008. NASDAQ OMX Group, the world's largest exchange company, also listed its shares on NASDAQ Dubai on November 20.
Both moves reflect the growing links between NASDAQ OMX Group and NASDAQ Dubai, as well as the growth of Dubai as an international financial centre.
Soud Ba'alawy, Chairman of NASDAQ Dubai and a Director of NASDAQ OMX Group, said, "As the international stock exchange serving this region, NASDAQ Dubai acts as a capital markets gateway for investors all over the world, including and especially in this region. NASDAQ Dubai's growing ties to NASDAQ OMX exchanges in the US and Europe in listings, marketing, technology, and management expertise will support its continuing expansion."
NASDAQ OMX acquired a one-third stake in NASDAQ Dubai in February 2008. The other two-thirds is owned by Borse Dubai.
In 2013, NASDAQ Dubai established an Advisory Group of experts to prepare for a proposed new market for small and medium-sized enterprises (SMEs), including high-growth companies, to offer shares to the public.
At its inaugural meeting, the Advisory Group discussed ideas about regulatory models and the ideal practical framework to attract issuers from the Middle East and around the world to carry out initial public offerings (IPOs) and other listings on NASDAQ Dubai.
In June 2012 the DFSA, reduced the minimum market capitalisation for an IPO from US$50m US$10m.