Dubai bourse targets emerging markets tag

DFM working with the UAE regulator, SCA and ADX to bring in the new rules.
Dubai bourse targets emerging markets tag
SYSTEM SWITCH: Dubai Financial Market will switch to a delivery versus payment system by Q1 of 2011, in a bid to get emerging market status from MSCI. (Getty Images)
By Matt Smith
Wed 29 Sep 2010 09:53 PM

Bourse operator Dubai Financial Market will switch to a "delivery versus payment" (DVP) system by the first quarter of 2011, in a bid by the UAE to get emerging market status from index compiler MSCI.

The DFM is working with the UAE regulator, the Securities and Commodities Authority (SCA), as well as the Abu Dhabi Securities Exchange (ADX) to bring in the new rules, Essa Kazim, DFM's chief executive, told Reuters on Wednesday.

Kazim said: "We are aiming for the first quarter of 2011, but if things go very smoothly it could be sooner than that."

He added: "This system will be in line with G30 recommendations and was one of the issues raised by MSCI."

In June, MSCI Inc, kept the UAE and Qatar stock markets as frontier markets in its 2010 annual market classification review, dashing market hopes for an upgrade to emerging market status.

Kazim said: "If the UAE is included as an emerging market in the next revision by MSCI it will definitely bring a new flow of funds into the market, especially from institutions that invest based on this index."

The DFM's T+2 trading regime, by which share transactions must be completed within two days of a market trade, will remain, but delivery versus payment means share ownership will not be transferred to the buyer until they have paid for the acquisition.

Consequently, payment and ownership transfer is near simultaneous, whereas at present delivery of securities is not related to payment.

Earlier in the month, the UAE was classified as an emerging market for the first time by index provider FTSE Group.

Nasdaq Dubai, which uses the same trading platform as the DFM, will also switch to the DVP system, Kazim added. (Reuters)

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