Based in the same offices in the iconic Gate building, the exchange is closely linked to the Dubai International Financial Centre (DIFC) and is similarly regulated by the Dubai Financial Services Authority (DFSA), which – cutting close to the wire – granted the DIFX its operating licence only six days before trading started, on 20 September. Both projects are part of Dubai’s bid to become the Middle East’s pre-eminent financial centre. It is a role for which there is increasing competition, with the launch of the Qatar Financial Centre, the ongoing efforts of the Bahrain Monetary Agency (BMA – central bank) to maintain its role as regional regulator of choice and the accelerating reform of Saudi Arabia’s capital markets legislation.

‘Since the 1975-90 Lebanese civil war, the Middle East has not really had a financial centre to replace Beirut,’ says Lynton Jones, chairman of the DIFX since the project’s inception in September 2003. ‘Most stock markets in the world offer domestic products to a domestic audience, with a small number of exceptions – Hong Kong, Singapore, Tokyo to a lesser extent, New York and London – which offer international products to international investors. There is a gap in the Middle East region, historically because there was not enough activity. Now there is and the DIFX is aiming to plug that gap.’

The self-stated ‘footprint’ of the DIFX covers the GCC, the Indian subcontinent and South Africa. ‘What links these countries is the capital of the Indian expatriate community, which, coupled with the oil money in the Gulf, will fuel the exchange, although there is also strong international interest from further afield,’ says Jones. The exchange will trade from 2pm-5pm local time, Monday to Friday, facilitating trade from Europe.

At launch, the DIFX is offering a small range of products. The first are five index-linked certificates already listed on the Deutsche Borse by Deutsche Bank, which is one of the first four member banks of the exchange. The others are Credit Suisse First Boston, HSBC and UBS. Pure equity products are not far off. ‘We expect the first IPO through the DIFX within four-six weeks,’ says Jones. ‘About 10-16 companies are expected to stage share offerings through the exchange by the end of 2006.’ Beirut-based telecoms operator Investcom is expected to be the first to list, following the launch of an IPO in late September.

Secondary listings

A similar number of companies, perhaps slightly more, are anticipated to seek secondary listings over the same timeframe. ‘We have talked to some 200 companies, from a wide range of sectors. It is not like the Nasdaq, where there is a focus on a single industry, although telecoms has been of particular interest,’ says Jones. ‘And we have had inquiries from well outside our target region, for example from companies in China and Eastern Europe.’

Inevitably, one of the questions faced by the DIFX is its likely impact on the UAE’s existing bourses, the Abu Dhabi Securities Market and the Dubai Financial Market. All parties insist that they will be complementary rather than in competition, catering for different audiences – one domestic, one international – and helping to raise standards across the board. The DIFX is planning to create a more lightly regulated second-tier market, probably at least two years down the line, for start-up companies.

The new exchange will from the start operate without the much-maligned and soon to be changed onshore rule that companies must offer 55 per cent of their sha