DGCX set global benchmarks launch
Posted: 27 May 2008
 Send this article
 Print this article
Multi-commodities futures platform Dubai Gold & Commodities Exchange (DGCX) will trade its first cash-settled futures based on international benchmarks starting this week.
On May 27, DGCX will bring West Texas Intermediate Light Sweet Crude (DWTI) and Brent Crude Oil (DBRC) benchmarks contracts into the region to attract Middle East traders as well as those from established markets, DGCX chief said.
Malcolm Wall Morris, CEO, DGCX, said that listing energy products in their platform would enable investors to easily trade in oil futures in the region, in which it aims to bring the global benchmarks directly available to the world’s premier oil producing region
According to the company, the cash-settled contracts were offered due to the existence of large liquidity pools in the Middle East and the growing need of market participants to access viable risk management and investment tools.
“We think investors in the region will opt to trade in these crude oil contracts for many reasons, mainly time and cost. They will not need to transfer funds to trade overseas because they will have access here,” he told reporters during its launch last week.
Morris explained the value of trading within the region because it would allow regional participants to maintain business within the Middle East while avoiding the complexity of transacting business abroad.
“They will benefit from the UAE’s taxation advantages, which will be far less taxation in the US or the UK,” he said. “Our customers have made very clear statements that they want to transact here. I can’t emphasise enough the importance of clearing business in this region.”
Though the new contracts would be settled using US price benchmark New York Mercantile Exchange (Nymex) for the light, sweet crude WTI and its European counterpart, Intercontinental Exchange (ICE), Morris said DGCX does not need to directly deal with either Nymex or the ICE since it is publicly available.
The exchange’s new futures contracts, which will initially come online on Tuesday, precedes Dubai Mercantile Exchange’s (DME) financially-settled Brent Crude Oil contracts on June 2.
On February, DME announced that it will launch its cash-settled Brent Crude Oil contracts and sour crude Oman Crude Oil in addition to its flagship physically-settled DME Oman Crude Oil Futures Contract, hoping to attract more traders.
DME is cleared by New York Mercantile Exchange.
As compared to DME, DGCX proposes that its platform would be cleared locally making it beneficial for traders to transact business within the country.
Earlier, efforts by DGCX to launch a fuel oil contract in October 2006 struggled. The Dubai Multi Commodities Centre (DMCC), which owns a majority stake in the bourse, said in November it was planning to launch a liquefied natural gas futures contract on the exchange platform soon, as surging energy prices increase demand for hedging tools.
|
