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Wealth generation is second nature to Dubai Financial Market

DFM was launched 10 years ago as authorities recognised the need for an organised capital hub and continues to pioneer as an exchange house

Dubai : The Dubai Financial Market (DFM) was established at a time when the country lacked an organised capital market to issue and trade equity and debt instruments.

During the past 10 years of its existence, the exchange has witnessed phenomenal growth in securities listings, trading volumes and turnover.

Prior to the launch of the DFM, nearly 20 listed companies traded their shares on the over the counter (OTC) market. The system lacked liquidity and transparency.

While the daily turnover on the market was in few thousands of dirhams, the volume of trade averaged in a few hundreds of shares.

The DFM was founded by the Dubai Department of Economic Development (DED) as a public institution to create a fair, efficient, liquid and transparent marketplace.

The exchange commenced operations on March 26, 2000 as a secondary market for trading of securities, bonds, units, mutual funds and other financial instruments accepted by the market.

"The government recognised the need for developing an organised capital markets frame work and a fully regulated exchange to meet the growing needs of the corporate sector in raising capital for expansion.

"Such a development has given the public an opportunity to participate in the corporate wealth generation," Eisa Kazim, CEO of DFM, said.

From the beginning, DFM operates a fully automated screen-based trading system with a central order book (to match buying and selling orders). The exchange also runs a fully-integrated clearing, settlement and depository (CSD) operations. This is facilitated by straight through processing (STP) and has recorded zero ‘delivery failure' since its inception.

As part of its quest for fully automated trading solutions, the exchange recently introduced the iVESTOR card, a new solution designed to be the financial link between DFM and investors.

The card enables investors to access dividend payouts on their investments through automated teller machines.

Fully owned by the Government of Dubai, DFM was the first stock exchange in the Middle East to be privatised.

As decided by the Executive Council Decree on December 27, 2005, DFM was set up as a Public Joint stock Company in the UAE with paid up capital of Dh8 billion allocated over eight billion shares, with a par value of Dh1 per share, and the 20 per cent of DFM shares be offered for public through an initial public offering (IPO).

This IPO, the first of its kind in the region, was oversubscribed 120 times and collected more than Dh201 billion. Its shares started trading on its own platform on March 7, 2007. During 2006, the DFM initiated the process of its partial conversion to create the first Islamic market.

This move was aimed at attracting all domestic and international investors keen on complying with Sharia law.

Meanwhile, the exchange continues to offer conventional services and maintain separate accounts and disclosure procedures to meet the requirements of non-Sharia compliant customers.

The Dubai Financial Market Company (holding company of the exchange) is itself compliant with Sharia law. Only a small portion of its income comes from companies that are non-Sharia compliant.

The exchange maintains two separate books of accounts for compliant and noncompliant companies.

As a result, the exchange is likely to set new standards of accountancy and become an international model for investing in Islamic securities.