By C.L. Jose –
Dubai: The Dubai Gold and Commodities Exchange (DGCX), which is expected to go live this year, will float a fully owned subsidiary to carry out the settlement of trades on the exchange.
David Rutledge, chief executive officer of the Dubai Metals and Commodities Centre (DMCC), said the new clearing house being established by DGCX will be adequately capitalised.
“It will function as the buyer for sellers and seller for buyers on the exchange,” Rutledge said at a seminar organised by the Institute of Chartered Accountants of India (ICAI), Dubai Chapter.
The DGCX, a joint venture between the Dubai Metals and Commodities Centre (DMCC), Multi Commodity Exchange of India Ltd (MCX) and Financial Technologies (India) Ltd (FTIL), is expected to be regulated by Emirates Securities and Commodities Authority (Esca), which is the regulatory body for the stock exchanges in the UAE Dubai Financial Market (DFM) and Abu Dhabi Securities Market.
The DMCC was established by the Dubai Government in 2003 to promote trading in commodities, and develop Dubai as a regional hub for commodities trading.
Rutledge said the trading of crude will not be introduced in the initial stage, although bunkering fuel will be allowed to be traded on DGCX soon.
“Once the trading of other commodities is established, we may look at crude also.”
He said there will be two types of membership of the DGCX broker membership and trade membership. While broker members can trade on behalf of others, trade members will only be allowed to trade on their own account.
Rutledge told Gulf News that an official confirmation of the appointment of the regulator has yet to be received by DGCX. “We have been talking with DFSA, the regulator for Dubai International Financial Centre, and Esca on the scope of appointing one between them as the regulator for DGCX.”
The establishment of DGCX will help protect Dubai traders against price volatility. It will also bring Dubai global recognition as an exchange, setting new price benchmarks for gold. In the process, it will act as a new reference point for the price of gold, especially on Saturdays and Sundays when all other exchanges remain closed.
At present New York and London are the only two global gold exchanges.
A gold exchange in Dubai will allow traders to hedge their price risk, manage their inventories properly and predict strategy.
The DGCX authorities have already stated that one forward contract on DGCX would be of one kilogram and the margin to be paid to the exchange has been fixed at 3.5 per cent of the value of the contract.
Payments will be made every evening in accordance with the loss or profit the trader makes during the day’s trading. And at the end of every two-months the delivery period the trader can take delivery after informing the exchange.
Source: Gulf News