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Dubai bourse could launch gold futures contract Nymex-style
The Dubai Mercantile Exchange (DME) may launch a gold futures contract similar to one traded on the Comex division of the New York Mercantile Exchange (Nymex), its chief executive said on Sunday.
- Reuters
- Published: 00:01 September 15, 2008
Dubai: The Dubai Mercantile Exchange (DME) may launch a gold futures contract similar to one traded on the Comex division of the New York Mercantile Exchange (Nymex), its chief executive said on Sunday.
Dubai is a long-established market for gold bullion as well as wholesale and retail jewellery. The new contract would be the latest salvo in a battle for the region's derivatives market between the DME and local rival the Dubai Gold and Commodities Exchange (DGCX).
The DGCX launched the region's first gold futures contract in 2005.
The DME hosts trade in oil contracts that were launched last year. The DGCX launched its own oil contracts this year that compete with the DME.
Gulf investors have shown interest in having easy access to a contract similar to Comex's, Thomas Leaver said in his first interview since officially taking the helm at the DME on September 1.
"We were approached by customers, and those who trade DGCX as well, who asked us to do a Comex look-alike gold contract that is deliverable in Dubai," Leaver said. "That is what we are looking at."
He declined to give a timeline for the launch.
Present options
At present, the region's physical gold traders use the DGCX and other international exchanges such as New York's Comex or Tokyo Commodities Exchange (Tocom).
Nymex, the Oman government and Dubai's state-owned Tatweer each hold a 25 per cent stake in the DME. In March, Nymex reached a deal to merge with the CME Group, the world's largest derivatives exchange. Once the merger is completed, the DME will have more exposure to international players through the CME's client base, Leaver said.
"The merger is very beneficial to us... the CME has over 100,000 clients," Leaver said.
The DME plans to offer cross margin accounts between the Dubai bourse and the CME, industry sources have said. The facility, likely to be approved by Dubai authorities in 2009, could help the DME overcome the disadvantage of launching a gold contract after the DGCX, sources have said.
The DME started trading in June 2007 with a sour Middle East crude futures contract, aiming to become the benchmark for pricing in the world's top oil exporting region.
Its flagship Oman crude oil contract has shown little growth since its launch.
Last month, the DME enlisted six international energy traders and investment banks as new co-owners to help it attract liquidity, selling them a combined stake of up to 20 per cent in the exchange.
Present options
While the bourse has no plans for any further stake sale in the future, it was still looking at plans for an initial public offering (IPO), Leaver said.
"There won't be any further dilution...but we have not ruled out the IPO option."
Any IPO was still some time away, he said.
The DME's priority is to boost liquidity on its oil contracts to a level regarded as a "commercial success," he said. It plans to add more contracts later.
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