DFM tests system before MSCI decision
Dubai, April 11, 2011
Dubai Financial Market (DFM) is testing a new settlement system as it aims to earn MSCI emerging market status, the chief executive of Nasdaq Dubai said on Monday.
Regional unrest is not likely to affect index compiler MSCI's decision, said Jeff Singer, CEO of Nasdaq Dubai, which has the same owner as DFM and uses the same trading platform.
MSCI will announce in June whether it will upgrade the UAE and Qatar from the 'frontier markets' category, a move that could open up the countries' bourses to multibillion dollar liquidity and drive index fund investments.
After snubbing the UAE for a second time in 2010, MSCI said domestic bourses must change from dual account structures, such as separate custody and trading accounts.
DFM had earlier said it would introduce delivery versus payments, or DvP, the global standard settlement system, by the end of the first quarter, but has declined to comment on why it missed its previous deadline.
"The DvP model is currently being tested and the software changes have been implemented," Singer said. "DFM and ADX (Abu Dhabi Securities Exchange) have made significant changes to their account structure and DvP models. It's for MSCI to take a decision if these changes are sufficient."
Many traders are increasingly pessimistic over whether MSCI will upgrade the UAE, with low volumes and regional political unrest cited as likely deterrents, but Singer said the latter would not be a factor.
"I don't think (political) events will have an impact," said Singer. "MSCI looks more at the capital market structure than the politics."
Nasdaq Dubai is on track to introduce new listing rules in the second quarter, Singer added.
These will oblige future listings to have a broader investor base and will lower the bar on the size of company it will allow to list. - Reuters