Dubai: The Dubai Gold and Commodities Exchange (DGCX) will launch West Texas Intermediate (WTI) and Brent crude oil contracts next week to offer trading and clearing in these two global oil price benchmarks under the UAE regulatory and taxation regimes.
Their listing on May 27 will allow companies and investors to trade in oil futures without moving their money outside the region, chief executive officer Malcolm Wall Morris said.
Both contracts will be settled in cash, and will not be backed by physical deliveries.
The Dubai West Texas Intermediate Light Sweet Crude (DWTI) contract's settlement price will be equivalent to that of its counterpart on the New York Mercantile Exchange (Nymex), while the price of Dubai Brent Crude Oil (DBRC) will be the same as the Brent contract listed on the Intercontinental Exchange (ICE).
"The benefit for market participants is that they can transact business in the UAE. We have a very beneficial tax regime which does not exist in the US and UK markets," Morris told reporters, adding that by launching the two contracts the exchange is "responding to extremely strong customer demand".
He said trade volume on the exchange would benefit from the existence of large cash liquidity in the region. Morris said DGCX does not need an agreement with Nymex and ICE for launching the WTI and Brent contracts as both prices are publicly available.
The exchange will waive fees for the DBRC and DWTI contracts until August 26 to attract business.
Each DGCX crude futures contract is sized at 1,000 barrels, with the contract price quoted in US dollars.
Since its launch in November 2005, DGCX has listed nine contracts in energy, currencies and precious metals.