By Ed Attwood
Bahrain Financial Exchange aims to become 'issuer of choice' for GCC equity listings
A Bahrain-based multi-asset exchange - the Middle East's first - is aiming both to capitalise on the surplus liquidity in the region and become the "issuer of choice" for firms planning to list, according to the exchange's CEO.
The Bahrain Financial Exchange (BFX), which has cost around $60m to set up, will start trading via its Islamic division, Bait Al Bursa on 7 February. The trading platform will enable banks and companies to buy and sell assets used to back Islamic Murabahah transactions.
More conventional derivative products will start trading in March, and the exchange also plans to trade Islamic sukuk next year.
Also next year, the BFX will add equities to the exchange, and has received what the CEO has described as "interest" with regard to future listings.
"Phase two [listing equities] will happen next year, and then we will start talking to people about listings," BFX CEO Arshad Khan told Arabian Business in Manama.
"But there is interest for listings, yes. But next year we will look at it more practically."
Khan added that the reason for the delayed launch of the equities portion of the exchange was to allow liquidity to build by adding members and Islamic and derivatives products.
The Bahrain Exchange - a separate bourse also located in the Gulf state - is currently undergoing a revamp due to low levels of liquidity in the market, negligible daily trades, and a poorly diversified asset class.
However, Khan argued that the BFX's multi-asset-class offering would offer a greater opportunity for local companies to tap into the Gulf's undoubted high levels of liquidity, and denied that there were already too many bourses in the region.
"This region is extremely rich in liquidity - we have seen the budgets that have been announced and oil is moving in the favor of the region, so there's a chance those surpluses might increase," he said.
"If that liquidity stays here and reaches into markets like ours, it will lead to more liquidity, which can then be put into developing markets like India and Shanghai."
The BFX is a wholly-owned subsidiary of India's Financial Technologies (FT) Group, which sits on a cash pile of $300m and already oversees 10 exchanges in emerging markets and Asia, including the part-owned Dubai Gold and Commodities Exchange in the UAE.
FT Group has no plans to launch other exchanges in the MENA region.