The Dubai Mercantile Exchange (DME) has announced it has approved 20 members ahead of the 1 May launch of its Oman crude oil futures contract.
Eleven of the members will trade externally as off-floor members, while the remaining nine will operate from the DME’s new trading floor, located in the Dubai International Financial Centre (DIFC). The off-floor members will not have to be physically located in the DIFC, but will be required to hold an active futures account with a clearing member. Gary King, CEO of the DME is keen to attract a range of companies to the exchange.
“We want to have a broad spectrum of players, including banks, traders, energy players, brokers and clearing members,” he said. “Some of the biggest players in the energy sphere have already signed up.”
The DME will allocate 50 seats for floor members and will select 20 companies to be market makers. “The market makers will ensure we have liquidity established at the beginning of the exchange,” said King. “Having a successful market-making programme is extremely important, particularly at the start of an exchange.”
The contract is designed to provide a more transparent benchmark for Middle East oil exports, and could eventually prompt Gulf producers such as Saudi Arabia, often skeptical of derivatives, to switch their pricing to the DME.
“I think other producing countries in the Gulf will initially take a back seat and see how the contract trades,” added King. “They will be basing their views on how their customers react to the contract. If we can build the confidence of the industry, we should be able to encourage other companies to come on board. Only then will we feel accepted by the market place.”
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