The Dubai Financial Market (DFM) said on Monday it was planning to adopt a new methodology for its three key indexes – DFM general index, DFM Sharia index and DFM sector indices – during the fourth quarter of 2022.
These indices are to be calculated by S&P Dow Jones Indices.
The move is aimed at providing market participants with world-class investable benchmarks for the DFM equity market.
Key improvements and additions to the indices’ methodology include capping the threshold of an exchange index individual constituent at 10 percent of the index weightage, instead of 20 percent currently.
This will limit the effect of the number of companies on the index.
The index calculation will be based on actual free float adjusted market capitalisation and quarterly rebalancing of the index, replacing the current semi-annual review.
The index methodology is governed by a DFM independent index committee that will supervise current and future methodology changes.
As part of the methodology changes, the DFM’s sectors will be aligned with the global industry classification standard (GICS) that are tracked by institutional clients.
Going forward, the index will comprise seven sectors – financials, industrials, real estate, utilities, communication services, materials and consumer staples.
The exchange, which opened market consultations on the new index methodology, aims to complete the consultation by October 17, before launching the revised indices during the fourth quarter of 2022.
Hamed Ali, CEO of DFM and Nasdaq Dubai, said the proposed changes were part of the strategic plan to develop Dubai’s financial markets by aligning the indices’ methodology and sector classifications with the international best practices.
“We are pleased to select S&P Dow Jones Indices, the world’s leading index provider, as our calculation agent to introduce reliable and transparent reference prices that support investment activities on DFM,” Ali said.
The agreement between DFM and S&P Dow Jones Indices can facilitate an appropriate setting for the introduction of other index-related products in the future, he said.
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