ADX Introduces Derivatives Trading and Clearing Services Powered by Nasdaq Market Technology
The Abu Dhabi Securities Exchange (ADX) recently announced its new market technology agreement with Nasdaq and its intentions to introduce single-stock and index futures by the end of 2021 to meet the requirements of sophisticated global investors. Nasdaq technology will set the foundation for high-performance and resilient derivatives trading and clearing services on the exchange.
We sat down with Saeed Hamad Al Dhaheri, Chief Executive Officer at ADX, to learn more about their technology journey.
Can you tell us about your marketplace, your vision and your growth strategy ahead?
ADX is the second-largest market in the MENAT region by market capitalization. We play a critical role in Abu Dhabi’s ongoing economic diversification strategy by connecting investors from around the world to growth in the Emirate. As of June 2021, ADX has 96 securities listed on its primary and second markets, including debt instruments and ETF products.
We are also one of the youngest exchanges in the region, celebrating our 20th anniversary later this year. But we have big ambitions for the years ahead. At the start of this year, we launched our ‘ADX One’ strategy, which aims to double market capitalization over the next three years through investments in market infrastructure and by bringing even more sophisticated investment products to the region.
We’re making good progress on our goal. The exchange’s market capitalization increased 88% in the first eight months of the year to AED 1.3 trillion in the first half of 2021, driven by new listings and increased demand for Abu Dhabi equities that have made the benchmark ADSMI one of the world’s best-performing indexes in the world.
What are the key drivers behind your decision to introduce derivatives trading and launch a central counterparty clearinghouse (CCP)?
The introduction of CCP services will help us take on counterparty credit risk and provide clearing and settlement services for trades. This is important because it will bring about greater stability across the market and reduce operational risk and potential default by participants.
This is part of our strategy to create greater choices for investors while building robust governance structures. In recent years, we have introduced a diverse range of new products and services to market, including Market Making, Covered Short Selling (CSS) and Securities Lending and Borrowing (SLB).
We are working toward introducing single-stock and index futures by the end of this year to further meet the requirements of sophisticated global investors. The introduction of a derivatives market will also enable institutional investors to hedge their investments so that they can execute more complex trading strategies.
How will the recently announced technology investment with Nasdaq help you achieve your strategy?
Our technology partnership with Nasdaq dates back to the early 2000s. Our latest technology agreement with Nasdaq centers around two key investments that will enable ADX to provide high-performance and resilient derivatives trading and clearing services to its customers.
The Nasdaq trading solution features one of the most widely used matching engines in the world and combines performance with extensive functionality.
The clearing solution is a proven and flexible system that delivers clearing, settlement and risk management functions to help ADX effectively manage its clearing operations. Nasdaq clearing technology includes clearing, risk, collateral management and settlement functionality all in one application.
These two state-of-the-art and cost-efficient technology products will enhance the user experience for our customers as well as our own technology teams.
What will this investment mean for your investors and the Abu Dhabi capital markets?
These investments are just the latest step in our journey to creating a technologically advanced exchange that acts as a conduit between Abu Dhabi companies and global capital, thereby supporting Abu Dhabi’s strategic aim to diversify the economy and broaden sources of long-term funding.
Our goal is to make the online experience for investors and issuers both seamless and intuitive. So we are modernizing all our applications, from our website to our trading and clearing platforms, and seeing how we can re-engineer and automate customer interactions so that they can be accessed from one place with as little human interaction as possible.
Recently, we have designed our electronic financial disclosure system and launched a reinforced online attendance and remote voting service for listed companies through our Sahmi digital platform. All these features have been designed with our customers in mind.
What excites you about the future, and is there anything forward-looking that you can share with our audience?
It’s exciting to see more and more Abu Dhabi companies move to increase their foreign ownership limits. This move promotes stability and liquidity in ADX-listed stocks by allowing foreign institutions to take more meaningful long-term positions and by increasing the diversity of the shareholder base.
This is very much in line with the broader strategic direction of Abu Dhabi. The government has brought in a comprehensive package of business-friendly policies designed to make the Emirate an attractive destination for businesses and capital. These initiatives include the introduction of 100% foreign ownership in businesses in 122 economic activities across 13 sectors and the launch of new visa categories to ensure Abu Dhabi is one of the easiest places in the world to set up a home.
ADX investors benefit from the advantages of exposure to a higher-growth emerging market but with relatively lower risk. ADX also gives global investors the opportunity to participate in the high-growth businesses of some of the best companies in the Emirate of Abu Dhabi.
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