From a standing start on 1 September, the Gulf’s
first true futures market seems to have hit the ground running.
Nasdaq Dubai’s equity futures market increased
rapidly in November as new investors entered the market. The
222,829 contracts traded during the month represented a more
than doubling on the previous month, rising 116%.
chiefs will be cheered at this response. The rapid increase in
trading on the Nasdaq Dubai since it opened its doors
underlines both the novelty of these instruments, as well as
investment managers’ pressing need for broader
palate of investment tools for both investment and wealth
"We need to have the tools to hedge, to be able to short-sell.
If there’s a drop in the market, I need to be able
to use options and futures – the tools that
institutional investors need to invest," says Ryan Lemand,
managing director and head of asset management and wealth
management at ADS Securities.
Dubai equity futures market offers single stock futures
contracts on nine leading UAE-listed companies: Abu Dhabi
Commercial Bank, Aldar Properties, Arabtec Holding, DP World,
Dubai Islamic Bank, DXB Entertainments, Emaar Properties,
Etisalat and Union Properties. The market offers regional and
international investors opportunities for hedging, leverage,
and the ability to make gains when share prices are falling as
well as rising.
asset managers believe it marks a breakthrough for the wider
region. Derivatives have been slow to take off partly because
of cultural norms that view such products with
"Nasdaq Dubai has introduced these tools which is a great step
forward, and hopefully this will expand across the UAE and GCC.
That should attract more institutional investors," says
The Dubai-based exchange plans to expand
its range of futures in a phased programme, including contracts
on companies listed on other MENA exchanges as well as index
futures and equity options. It will also increase the range of
connected brokers and other market participants. Currently,
seven brokers are represented but this should increase
deeper understanding of futures permeates through the
The single stock future provides for an instrument to more
accurately hedge exposures for asset managers and
These will appreciate the ability to hedge existing equity
position in the most attractive stocks such as Dubai real
estate developer Emaar. This means they can insure against a
price fall and will also have the ability to make money if they
want to take a view on whether the market is up or down.
Investors can gain from futures when the underlying share price
falls, as well as when it rises. The futures are offered with
1-month, 2-month, and 3-month expiry dates in the currency of
the underlying share listing.
The other major advantage is leverage. The impetus to pay the
full cost of shares in Emaar, when the cost of buying Emaar
futures is lower – and obtain all the upside
– is a compelling prospect for many.
As Nasdaq Dubai CEO Hamed Ali pointed out:
"Leverage on futures gives investors the possibility to make
larger gains than if they had traded the underlying shares, and
they can also use futures to protect their existing