* ADX, DFM hired banks last year to advise on possible
* ADX CEO declines to comment on progress in talks
* But recommends back office unification to all stake
* This could be achieved relatively easily
* ADX expects to introduce market makers this year
(Adds quotes, details)
By Stanley Carvalho
ABU DHABI, Feb 16 Stock markets in the United
Arab Emirates should unify their back office operations and
processes for settlement and regulation, the chief executive of
the Abu Dhabi Securities Exchange (ADX) said on Sunday.
Last year Abu Dhabi and neighbouring Dubai hired banks to
advise on a possible state-backed merger of the ADX with the
Dubai Financial Market (DFM), which would be one of the
biggest reforms in the UAE's financial industry in recent years.
Rashed al-Baloushi, addressing a news conference at a
financial event in the UAE capital, declined to comment on
progress in the talks or say whether a merger was likely.
But he said that if a merger did not happen, consolidating
the exchanges' back offices, which handle record-keeping and
other administrative tasks, would be a good alternative. Other
bourses in the Gulf Cooperation Council could unify their back
offices with the UAE's combined system later, he added.
"It is a good step forward and very important for the stock
markets. At ADX we will consider that point," Baloushi said,
citing the example of Cairo and Alexandria as well as European
Baloushi said the ADX was initiating the idea of combining
back offices and was recommending it to all stake holders,
including investors, listed companies and brokerages. He did not
say when it might take effect; the DFM declined to provide any
Consolidating the back office operations of the ADX and the
DFM could cut costs and, by creating a single framework for
settling trades, make it easier for more foreign investors to
enter the UAE, fund managers and analysts say.
Because of political sensitivities and fast-changing
valuations - the DFM's shares rocketed 142 percent last year as
trading volumes in Dubai's market boomed - the two emirates
could find it difficult to agree on a full merger. A partial
consolidation might be much easier.
"You can easily merge the back offices of Dubai and Abu
Dhabi stock markets," Jeffrey Singer, chief executive of the
DIFC Authority, which oversees Dubai's financial centre, told
reporters at the event.
"When international investors look at the pool, they'll see
more companies, more scale and liquidity here."
Singer was formerly chief executive of NASDAQ Dubai, the
smaller of Dubai's two stock markets, which has already
consolidated back office operations with the DFM.
The ADX expects this year to introduce market makers,
dealers which maintain trading liquidity by undertaking to buy
or sell at specified prices at all times, Baloushi said, adding
that the exchange was working closely with the UAE regulator to
establish a legal framework for this.
(Reporting by Stanley Carvalho, Editing by Andrew Torchia)