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DGCX CEO Malcolm Wall Morris tells Andrew White why the exchange is set for record growth in 2008, following the stellar debut of its crude oil contracts last month.

The DGCX’s aim is to build its business by satisfying customer needs, and right now we’re not talking to anybody about consolidation or merging,” insists Malcolm Wall Morris as he leans back in his chair, his eyes flicking instinctively towards the large plasma screen on the wall of his office.

“Consolidation with regards to DGCX only makes sense if you are providing better value to your customers — more products, more cost-effective access, lower trading fees, and so on,” he continues. “Right now we are building our business, we are providing new products and we are providing more cost-effective access, so it’s not on our radar at the moment.”

The eyes wander again, but then you can hardly blame Wall Morris. On the screen is a scramble of numbers and letters, a virtual trading floor that may not exude the same madcap energy as its real-life predecessors, but possesses a definite hypnotic quality. The markets are moving, and even when the CEO of Dubai Gold and Commodities Exchange (DGCX) manages to focus his attention back on consolidation and its caveats, the screen is out of sight, but never out of mind.

The DGCX is a fully automated online commodities exchange and the first international commodities derivatives marketplace in the time zone between Europe and the Far East. A joint initiative of Dubai Multi Commodities Centre (DMCC), Financial Technologies (India) Limited (FTIL) and Multi Commodity Exchange of India Limited (MCX), it has been up and running since November 2005 and has reported outstanding growth since that date.

“In our first full year of operation at DGCX we traded 550,000 contracts,” says Wall Morris. “Last year we traded just under a million contracts, and our target this year is to trade between 1.5 and 2 million contracts.”

While he is looking for year on year growth of between 50 and 100%, Wall Morris admits that as overall volume increases, so substantial uplifts become harder to achieve than they do from a smaller base. Nevertheless, he has every reason to be bullish about the remainder of 2008 — total volumes on DGCX reached new highs in June, totalling almost 137,000 contracts equivalent to a value of over US$9.2bn. Average daily volume (ADV) stood at over 6500 contracts, an increase of 111% year on year for June 2008, while year to date total volumes have increased by 36%.

“We’ve had a very good start, and it is very encouraging that June was our biggest ever month across all contracts,” says Wall Morris. “We’re seeing new guys coming into the market and trading for the first time, which is exciting as it is net new business coming into the exchange.

“What we’re seeing that is exciting is that the growth is accelerating,” he continues. “Not only was June our highest ever volume month, but it also reversed the trend we’ve seen in the last couple of years, when the summer saw volumes ease back and maybe pick up again at the end of the summer.

“We don’t dictate the volumes — it’s the market users who do that,” he adds. “But I would say that DGCX has gained good traction, and that doesn’t stop because it’s the summer.”

Crude oil represented 27% of the exchange’s total volumes in June, trading over 36,000 contracts valued at approximately US$5bn. The record June volume reflects the growing dominance of crude oil contracts in the total business transacted on DGCX — and the crude oil launch has proved by far the most successful in DGCX’s history.

“It’s also very encouraging that the other markets haven’t cannibalised each other — their market share of our overall contracts has fallen, but they’ve continued to grow,” Wall Morris notes. “That’s why it’s so exciting. Gold has traditionally represented 80% of our volume, and that’s down to 53% now, but that market itself is growing as well.”

With Brent crude and WTI now on the exchange, DGCX has completed a hat-trick of key economic indicators for the region, along with precious metals (gold and silver) and currencies (Euro-Dollar, Yen-Dollar and Sterling-Dollar as well as the world’s first exchange traded Indian Rupee futures).

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