Trading confidence

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DGCX’s rupee contract, the world’s first rupee futures contract, has also been bolstered by the UAE’s large non-resident Indian (NRI) population.

"The plastics initiative was a fantastic idea. There was a huge amount of support for it, we had the contract written, designed it... everything was ready to go. [But] the community who need to use that product, because it is for them at the end of the day, said now is not the right time."

He adds that there are still plans to introduce it. "We are in regular contact with the petrochemical industry... Once we have the participants, yes we are ready to go. We can launch it very quickly."

Despite the rocky start, it hasn't been all doom and gloom this year, and in a sign that investors are slowly coming back to the market, the exchange saw 101,215 contracts traded during March - the highest ever. Much of this, explains Morris, was fuelled by the increase in currency trades.

"Everyone in Dubai has exposure to currencies. The rupee is at very low levels and the euro has fallen so everyone wants to do something, so there's been a big opportunity in terms of protecting yourself.

"And it goes beyond remitting the money. If you want to make an investment in a property in London, for example, and you're not ready to do it right now but you are concerned that the currency rate will change, you can hedge yourself by making that conversion using futures and then start looking at property without actually having to physically make the conversion in real time and missing out."

The exchange, which lists four currencies - rupee-dollar, euro-dollar, yen-dollar and sterling-dollar - has seen the biggest increase in euro-dollar trades says Morris: "We've had some violent movement in the euro and volatility and activity tend to go hand in hand."

DGCX's rupee contract, the world's first rupee futures contract, has also been bolstered by the UAE's large non-resident Indian (NRI) population, as well as the country's rapidly growing trade flows and fluctuating currency rates. India also became a top trading partner of the UAE in 2008. Trades in the rupee increased by 89 percent to 2,854 contracts during the first quarter of 2008 compared with 1,574 contracts in the fourth quarter.

"We are the only exchange in the world today which has an Indian rupee outside of Mumbai," explains Morris. "There is definitely a growing understanding of how that can be used to hedge and as an investment tool. There are a lot of NRIs here [who] have exposure to it, who don't particularly want to remit money back... or can't get any money out of India, so they can use it to protect themselves."

But, Morris won't allow the small improvements being made to let him rest on his laurels. Instead, he plans to turn around last year's expansion plans and redirect them to encourage greater investor confidence.

"We certainly don't see it as being an easy year," he says. "It's [about] doing the basics and doing them really, really well. We've been doing a series of education workshops with our members, co-sponsoring them, helping them brand and market them and getting traders in from overseas to assist in that process of education - it's very, very important."

While, Morris adds that an exchange cannot physically make someone trade, he notes that the global credit crisis is the ideal way to ensure that people understand the role of such a market. "As an exchange you can't make someone make an investment decision [but] what you can do is ensure they understand the benefits in trading in markets. Leverage - which I know is almost a dirty word in the market today - that is done in a responsible way is very, very useful.

Today cash is very scarce so if you can make money go further in a responsible fashion - through clearing and margins - which is what the exchange offers then people are able to protect themselves."

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