The Dubai Gold and Commodity Exchange (DGCX), the region's first international gold and commodities exchange, is being set up by the Dubai Metals and Commodities Centre (DMCC), Multi Commodity Exchange of India Ltd (MCX) and Financial Technologies (India) Ltd (FTIL), officials announced yesterday.
The electronic trading platform will be deployed by FTIL, in line with the system introduced for commodity exchange trading in India, which has been in operation since last year.
"DGCX, which is expected to commence operations in the second half of 2005, will initially run trading in futures, and within three to six months of its operations, hopes to witness spot trading," said Colin Griffith, DMCC's executive director for gold and precious metals.
The first contract listed on the exchange will be gold, but that will be quickly followed by other contracts.
As the exchange develops and gains in prominence, it expects significant trading in silver, steel, freight, cotton and energy contracts.
An official memorandum of understanding (MoU) has been signed among the DMCC, MCX and FTIL to work together towards the creation of Dubai's newest exchange.
The DMCC will invest 50 per cent of the (undisclosed) cost of establishing the exchange and the remainder will be invested by FTIL and MCX. Griffith said the profit accrued from the exchange's operations also will be shared in the same ratio.
Membership and transaction fees will add to the revenue.
The exchange expects to break even after two years of operation.
There will be a separate regulatory body for the exchange, the modalities of which are being worked out.
"The creation of the DGCX is a landmark achievement in the development of Dubai's infrastructure, and will deliver an excellent value proposition for the global trading community," said Ahmad Bin Sulayem, DMCC's chief operating officer (COO).
He said this electronic platform will be one of the most advanced among all international exchanges in operation.
Jignesh Shah, managing director of MCX and chairman and managing director of FTIL, said while FTIL will deploy the complete technology solution platform.
"This will be further strengthened with MCX's involvement," he said.