The Dubai Gold and Commodities Exchange (DGCX) today announced a landmark development where the exchange confirmed that Emirates Securities and Commodities Authority (ESCA) has approved its application for launching currency futures trading. Initially DGCX will trade futures contracts in 3 currencies – Euro-Dollar, Yen-Dollar and Sterling-Dollar with contracts maturing in March, June, September and December each year. These will be deliverable contracts. This will establish DGCX as the first exchange for trading currencies in the Middle East.
DGCX shortly will be announcing the detailed contracts specifications and procedures for the existing or new members to participate in these markets. This will include a category of membership to be known as FOREX Trade Membership for those entities who wish to trade on DGCX currencies markets as principal. National Bank of Dubai and HSBC have agreed to act as Delivery Banks for the purpose of settlement of DGCX currencies futures contracts.
This development positions DGCX among the handful of exchanges globally that offer trading on commodities and currencies under one umbrella. The announcement comes on the day when DGCX is launching futures trading in Silver. These initiatives showcase the pace of development at DGCX and the vision of its management.
Average daily international foreign exchange trading volume was $1.9 trillion in April 2004, according to the Bank of International Settlements (BIS) study. Also as per Futures Industry Association figures, total volumes in exchange-traded foreign currency derivatives rose by over 57% from 55.34 million in 2004 to 165.51 million contracts in 2005.
Currency derivatives products are very useful for all those who engage in international commodity trade for hedging the risk arising out of currency movements. In fact most corporates having transnational operations use currency derivatives to hedge against adverse movements in exchange rates. Currency derivatives also form a large part of treasury operations for banks, hedge funds and investment houses.
Dr. David Rutledge, Director DGCX and CEO of DMCC said, “I am very happy to announce that trading in currency futures will commence on the DGCX platform very soon. This is a big leap forward for our young exchange which has been in business for just 4 months.. Dubai is fast emerging as a financial hub in the Middle East, with many of the Fortune 500 companies having a presence here. The region has a huge potential for currencies trading.
At DGCX, we believe that a diversified range of products should be available for trading. Currencies will add to the existing product basket of precious metals along with contracts on steel, agricultural and energy products which will be traded on DGCX in the near future.”
Ahmed Bin Sulayem, Director of DGCX said “It is very important to have a healthy commodities and currency derivatives markets for any region to achieve a global recognition as an attractive financial hub. DGCX gained that recognition for Dubai when it went live with Gold futures last November and DGCX is doing it again with the introduction of currency futures. We are highly thankful to the UAE regulatory authorities for taking up our proposal positively and granting us the necessary permissions in a very short time. The introduction of DGCX currency futures contracts will usher in a new era of financial futures trading in the Middle East bringing more maturity and agility to these markets..
Counting on its key strength of a very adaptable technology platform, DGCX said that it expects to start trading currency futures within the next two to three months.
Currency futures contracts will be traded on DGCX’s fully electronic trading platform, giving currency traders the ability to immediately respond to events in global markets. This pioneering initiative is expected to generate interest among corporate treasuries, importers and exporters, professional and inter-bank proprietary traders, and retail participants in the region, who were traditionally confined to banks and other large financial institutions for their foreign exchange market requirements. DGCX’s new currency futures product will be an opportunity for private investors and an important risk management tool for foreign currency market participants in the region.
Sourced From : Citigate Dewe Rogerson
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