By Ben Flanagan
The LSE and Dubai's international exchange have discussed the cross-listing of exchange-traded funds.
The London Stock Exchange (LSE) is one of the six parties that have expressed an interest in acquiring a stake in the Dubai International Financial Exchange (DIFX).
Today's Observer newspaper says that talks have been held on a ‘strategic alliance' in which the two bourses have discussed collaboration on trading systems.
'Acquiring equity stakes in each other could come later,' the newspaper quoted an unnamed London-based investment banker as saying.
Such a move by the LSE would follow its recent success in fighting off a hostile takeover bid by America's Nasdaq, and continue the trend of consolidation among global exchanges.
The DIFX itself could take a stake in the LSE, and has also been linked to a possible stake in the Bombay Stock Exchange.
DP World - the Dubai group that purchased British ports operator P&O, sparking a political firestorm over the ownership of its US assets - is likely to list on the DIFX this year, with a secondary listing on the LSE.
Dubai's flagship Emirates airline, and the Jumeirah hotels conglomerate, are also tipped for possible IPOs, with the Dubai government likely to retain controlling stakes in each.
Such listings are likely to boost the status of the DIFX. On some days, there is little or no trading on the exchange.
This view was expressed in
an interview in today's Arabian Business magazine
, in which the LSE's Martin Graham warned that the region's markets must now consolidate to survive.
"There has been a lot of progress made, but in order to really be successful, there needs to be more cooperation between the different local markets," Martin Graham, director of markets at the LSE, told the magazine.
"I would doubt whether a lot of these local exchanges can ever be successful in their own right," he added. "They can do okay - they can be good retail markets - but if you want to create viable capital markets you do need more consolidation, or certainly cooperation and collaboration between the different exchanges."
Graham also expressed concerns that high-profile markets such as the DIFX might suffer in the long term due to a regional over-saturation of competing markets.