Abu Dhabi: The Abu Dhabi Securities Exchange (ADX) on Saturday announced that it is reducing overall trading activity fees on all exchange transactions starting Sunday, February 14 .
The move as part of its ‘ADX One’ strategy to double the market capitalization of companies listed on the exchange in the next three years.
The new pricing structure will be the second time the exchange has reduced its charges in the past two years to enhance market liquidity further.
Trading commission on ADX was reduced in June 2019 as part of Abu Dhabi's Ghadan 2021 plan of lowering the cost of doing business in the Emirate. Under the new initiative, fees of all transactions that occur on ADX are to be reduced by more than 22 per cent to 0.175 per cent from 0.225 per cent, effective February 14.
Attracting new liquidity
“Reducing overall transaction costs for trading on the exchange is one of many initiatives we are undertaking to achieve our strategy of attracting new liquidity sources and making listing and investing in ADX an attractive value proposition,” said Mohamed Ali Al Shorafa Al Hammadi, Chairman of Abu Dhabi Securities Exchange.
As part of the new fee structure, ADX has created an incentive plan, applied on an annual basis, for brokerage firms who generate Dh20 million worth of trading commission. Firms that fulfill the annual incentive requirement will be exempt from paying any trading commission to ADX for the year in which the threshold is met. The new initiative favors investors seeking to broaden and diversify their investment portfolios without incurring high transaction costs.
“Abu Dhabi continues to diversify its economy on a path of sustainable long-term growth, and we are fully aligned with this vision. We will continue to deepen our markets through a wide range of products and services that meet the evolving needs of our stakeholders," said Al Hammadi.
Increased market depth
The reduction in transaction fees will increase overall market depth by decreasing the bid-ask spread on the exchange, an effective way to measure market liquidity. Furthermore, the new initiative comes amid ADX efforts to attract more investors by offering more high-quality services and products.
"Cutting overall transaction costs on all trades taking place on ADX will complement measures we have recently taken to attract new institutional investors and generate greater liquidity. It will also further strengthen our commitment to provide the highest levels of customer service,” said Saeed Hamad Al Dhaheri, Chief Executive of Abu Dhabi Securities Exchange.
ADX’s 2020 initiatives, including the introduction of market makers and covered short selling, have increased the number of institutional investors on ADX over the past year. Meanwhile, the rise in foreign ownership limits of several listed companies alongside new listings aided the increase of our market capitalization and fueled our ambition to have it doubled by 2024.
The market capitalization of stocks listed on ADX surpassed Dh750 billion for the first time in 2020, a 39.7 per cent increase from Dh533 billion in 2019, and has reached Dh805 billion by the end of January this year. Meanwhile, the value of securities traded on ADX increased by 28 per cent to Dh72.8 billion in 2020 from Dh56.8 billion in 2019.