The formula driving the fortunes of Dubai Financial Market (DFM) Company is pretty simple: when there is more trading in Dubai's listed shares, the company makes more money from commissions.
That is why the company that operates the DFM has been one of the main beneficiaries of the UAE's elevation by the FTSE to a "secondary emerging market". Since the news was confirmed by FTSE on September 13, volumes on the exchange are markedly higher and so is its operator's share price.
So it follows, then, that yesterday's news the DFM bourse is moving to a so-called delivery-versus-payment system is also positive for the stock. The absence of such a system was one of the reasons MSCI Barra, a competing index to the FTSE, concluded this year the UAE remained a "frontier market".
The chief executive of the DFM, Essa Kazim, told Bloomberg yesterday the bourse would have the settlement process in place by the end of the year. "This would meet one of the requirements of the MSCI," Mr Kazim said.
"It is also a natural evolution of the market." Delivery versus payment is a securities industry procedure in which payment for a security must be made when it is delivered. The Abu Dhabi Securities Exchange is also working to address the issues raised by MSCI. Large institutional investors allocate funds based on MSCI's classification and an upgrade usually comes with a large injection of liquidity.
MSCI said it would re-evaluate the UAE next year. DFM's profits in the second quarter dropped 80 per cent to Dh25.9 million, from Dh128.2m in the same period last year. There were more than 120 million shares traded on the DFM yesterday, lower than most trading days recently.
The bourse's shares were among the most heavily traded on Wednesday and finished up 1.1 per cent to Dh1.79.