Stock - DFM / Dubai Financial Markets
With 3 mega-IPOs having listed, DFM finds the present to be the right time to bring about changes in putting together its core index, the DFM General Index. Image Credit: Bloomberg

Dubai: The Dubai Financial Market (DFM) is bringing about changes in the way its main indices are structured, and which come into effect this quarter itself. The DFM General Index, DFM Sharia Index, and DFM Sector Index are to be calculated by S&P Dow Jones measures.

It will include capping the threshold of a DFM index's individual constituent at 10 per cent of the index weightage instead of 20 per cent, thus ‘limiting the effect of limited number of companies on the index’. The index calculation will be based on actual free float adjusted market cap and quarterly rebalancing of the index replacing the current semi-annual review.

  1. What will change at DFM:
  2. An individual company's upper threshold within any DFM index will be capped at 10%. This will do away with any single company or a handful of them dominating.
  3. Index calculation will be based on free-float based adjusted market cap.
  4. The index will be updated quarterly rather than every six months as is the case now.
  5. DFM index will be spread across 7 sectors.

“This step underscores DFM’s commitment to continuously developing its services in line with international best practices and to cater to investors’ growing appetite towards its investment opportunities,” the stock exchange authority said in a statement. “It also provides market participants with world-class investable benchmarks for the DFM equity market.”

The index methodology will be governed by a DFM independent index committee that will supervise current and future methodology changes.

The DFM’s sectors will be aligned with the Global Industry Classification Standard (GICS) that are tracked by institutional clients. This will be made up of seven sectors - financials, industrials, real estate, utilities, communication services, materials and consumer staples.

"This supports the strategic plan to develop Dubai’s financial markets by aligning our indices’ methodology and sector classifications with the international best practices," said Hamed Ali, CEO of DFM and Nasdaq Dubai. "We are pleased to select S&P Dow Jones Indices, the world’s leading index provider, as our calculation agent to introduce reliable and transparent reference prices that support investment activities on DFM.”

S&P Dow Jones Indices will provide the technical support for the calculation of the DFM General Index, the sectoral indices, and the Sharia Index.

DFM offers chance for feedback
The DFM has opened a market consultation on the new index's methodology, which is available at DFM aims to complete the consultation by October 17 and launch the revised indices before year-end.