By Daniel Stanton
Trading centres throughout the Middle East will be taking stock of news that one of the world's largest exchange operators and financial services technology solutions providers is making advances into the region. Daniel Stanton shares his findings.
|~|case200.jpg|~|Letter of intent: OMX and EGID sign a partnership deal watched by government officials from Sweden and Egypt.|~|Egypt for Information Dissemination (EGID), a fully owned subsidiary of the Cairo and Alexandria Stock Exchanges (CASE), that distributes CASE-related data, has agreed a technology partnership with OMX, a Scandinavian stock exchange operator and developer of IT solutions for the financial services industry.
The companies signed a letter of intent on January 23 and were expected to sign a final agreement last month. The partnership aims to establish a jointly-owned group that will sell, develop and support IT solutions to financial markets in the Middle East, starting with Egypt.
"This new venture is built on the success of EGID and is considered a very important step towards achieving the vision of CASE to provide markets in the Middle East and Africa with the latest and most sophisticated technologies to sustain their growth and promote further cooperation," says Maged Shawky, chairman of CASE.
OMX is a major figure in financial markets and has an international presence. It owns and operates exchanges in Stockholm, Helsinki, Riga, Tallinn and Vilnius - approximately 80% of the Nordic and Baltic markets. The company also has a strong presence in Asia.
Alongside its trading operations, OMX has developed a range of integrated technology solutions. These span the entire transaction chain and enable securities transactions for exchanges, clearing organisations, central securities depositories and other financial institutions around the world. More than 60 exchanges, clearing organisations and Central Securities Depositories (CSDs) use OMX solutions in more than 50 countries.
Last month, OMX completed the acquisition of Computershare's Markets Technology business, consisting of share registry systems and services, which runs several exchange companies in the region.
Computershare supplies Horizon, an automated trading and market management system, and Equator, a clearance, settlement and depository system. Both are used by many of the exchanges in the Middle East region, including the Palestine Securities Exchange and the Abu Dhabi Securities Market (ADSM).
By teaming up with OMX, which, through its acquisition of Computershare's technology business, is now rated the largest company in its field, EGID will be able to reach new markets with its information dissemination technology, which includes a Surveillance system, Disclosure Information System, and Listing System. EGID currently markets these products in the Middle East. The Doha and Kuwait securities markets use its surveillance solution, among others.
It seems that both parties see the deal as an opportunity to expand beyond their traditional markets. Per Jonas Carlsson, senior project director of OMX, says, "OMX has the firm ambition to be in the region as a supplier in the market. Today we have eight customers in the region, so we have quite a strong customer base in the Middle East."
However, until now technical support has been a problem, with the offices and telephone staff based in Europe or America. The partnership offers OMX a way into the growing Middle East market with the benefit of EGID's local knowledge and experience.
Carlsson says, "We will use EGID as a local presence to provide support and development services in the region, and to have Arabic speakers in the region."
Maher Asham, CEO of EGID, says of the partnership, "It will help us offer better services and offer local support in the region in local languages. Before, getting back to customers could take days."
There were a number of suitors for EGID, but it chose OMX for several reasons, not least the strength of its name and its range of solutions. Asham believes that the combination of EGID's local knowledge and the brand name of OMX will create an attractive proposition for the growing financial markets in the region.
He predicts that there is high growth potential for trading solutions in the Middle East, and says that the more accessible new partnership will make it easier for other exchanges to change their systems.
"Any market that wants to change its market platform, and there are several in the Middle East, we will deal with its deployment and support," Asham says.
Carlsson agrees that there is a need for better trading solutions in the Middle East. "There is a good potential, and a need for developing the systems in this area - central systems and also banker and broker services."
The joint venture plans to expand its sales of back office products - those that enable trades to be completed after they have been agreed. Carlsson says, "The most costly part of trading is to manage the trade after it is settled."
CASE itself has seen a dramatic increase in the number of trades conducted on its exchange. The number of transactions carried out each day has leapt from approximately 7,000 in 2003 to more than 30,000 now, and systems have had to adapt to cope with the additional demand. In recognition of its growing profile on the world stage, CASE was recently granted membership of the World Federation of Stock Exchanges, the first Arab stock exchange to gain accreditation.
This is not the first time EGID has made efforts to expand beyond its traditional user base. Recently, CASE tried to forge links with international partners. In January 2006, it signed a Memorandum of Understanding with Borsa Italiana, the company that manages the Italian Stock Exchange.
The two exchanges will consult and cooperate on issues of mutual interest, and have agreed to share information on market surveillance, electronic platforms and statistics.
Shawky said at the time, "This complements our strategy to cooperate more with European exchanges, since Europe is the major trade partner for Egypt."
With increased sharing of technology and the use of overseas partners such as OMX, EGID has the opportunity to gain knowledge of other systems and look further afield for potential customers.
It now looks as if Egyptian trading and back room technology could be growing in influence even beyond Africa and the Middle East. There is every reason for EGID to feel bullish.||**||