Nasdaq Dubai has seen its monthly operational loss halved to $500,000 since merging with the Dubai Financial Market (DFM) in July this year,. 

“Nasdaq Dubai was losing on average $1m a month – that has now been reduced to $500,000,” says Essa Kazim, chairman of Borse Dubai and managing director and chief executive of Dubai Financial Market (DFM).

“That’s equivalent to $6m a year, which isn’t a big deal. With a bit of improvement in trading activity and some listings, Nasdaq should be able to break-even and go on to make a profit in 2011.”

The DFM announced a $121m acquisition of 67 per cent of Nasdaq Dubai in December 2009 in a bid to boost its liquidity. Under the terms of the buyout, Nasdaq gained access to DFM’s 548,000 retail investors through a harmonising of their trading accounts and nearly all its brokers now include all the DFM’s large brokers. 

Meanwhile, the DFM recorded a net loss of AED2.95m in the third quarter of this year on the back of absorbing Nasdaq Dubai.

“We have taken a hit on the back of the merger,” says Kazim. “But we see value in Nasdaq and eventually we want to promote it to become a hub for regional listings.”

The DFM plans to acquire the final 33 per cent stake of Nasdaq by the end of 2010 or early 2011.  

Kazim says the DFM is now working hard to align itself with global index provider MSCI’s criteria in the hope of being upgraded to an ‘emerging’ market.

In June this year, MSCI renewed its ‘frontier’ status for the UAE, ending hopes of an influx of around $5bn in foreign capital according to some analyst estimates.

The index provider cited the country’s dual account structure and the stringent foreign ownership limits as major concerns.

“We’ve been working very closely with the Emirates Securities and Commodities Authority (SCA), the markets’ regulator, towards implementing a full Delivery Versus Payment (DVP) system, which means there’ll be no need for holding two different accounts,” says Kazim.

DVP is a securities industry procedure in which the buyer’s payment for securities is due at the time of delivery.

“I am fairly confident that we will be upgraded in MSCI’s next review in 2011,” says Kazim.