Nasdaq Dubai to expand derivative offerings

Dubai: Nasdaq Dubai, the international stock exchange owned by Borse Dubai and Nasdaq OMX group has plans to expand its derivatives trading with listing of more regional equity derivatives on the exchange in the second quarter of this year, Jeff Singer, Chief Executive of Nasdq Dubai told Gulf News on Wednesday.

Nasdaq Dubai currently has 19 equity instruments, 132 derivative contracts and 19 sukuk listed on it.

"We have plans to offer more equity derivatives both futures and options in the coming months.

"The exchange plans to expand its derivatives offerings by listing options on equity indices and individual equities. The options trading will give enormous hedging opportunities to investors," said Singer.

The exchange will start options trading on a few listed equities and indices next month, while it plans to expand its current futures offerings on 20 stocks (12 stocks listed on Dubai Financial Market, 7 listed on Abu Dhabi Securities Market and one on Nasdaq Dubai).

"We are working on a plan to create futures contracts on some of the most liquid stocks traded on some of the regional stock exchanges in the next quarter. We have witnessed strong investor appetite from both institutional and retail investors for these products. Derivatives can provide investors with price insurance and create liquidity and stability in the underlying shares," said Singer.

Nasdaq Dubai's equity trading volumes increased 62 per cent in the first quarter of this year to 1.04 billion form 640 million in the first quarter of last year. Trading in equity derivatives reported significant growth since they were listed on the exchange in November 2008.

In March, 6,816 equity futures contracts traded, up from 386 in February and 90 in January.

A total of 6,865 Dubai Gold Securities (DGS) traded in March since they listed on March 2, 2009. DGS, a Sharia compliant product is designed to track the spot price of.

The DGS listing was the first listing on any stock exchange in the GCC in 2009.

"In a challenging period for the capital markets, Nasdaq Dubai has experienced healthy growth in trading volumes and has listed innovative products. Retail and institutional investors are trading an increasing range of securities and other instruments on our market," said Singer.

The bourse's initiative to introduce Sunday trading in November has seen volumes on that day increase by more than double.

Equity trading volumes reached 15.1 million on Sundays in March, a 308 per cent rise from 3.7 million on Sundays in February.

Markets: What are options?

An option contract is an agreement between two parties to buy or sell an asset at a fixed price and fixed date in the future. It is called an option because the buyer is not obliged to carry out the transaction.

If, over the life of the contract, the asset value decreases, the buyer can simply elect not to exercise his/her right to buy/sell the asset. There are two types of option contracts - Call options and Put options.

A Call option gives the buyer the right to buy the underlying asset, while a Put option gives the buyer the right to sell the underlying asset.