It is expected that the DME will initially trade sour crude and fuel oil. It will be based in the Dubai International Financial Centre (DIFC), a financial free zone designed to promote financial services within the UAE. In addition, the DME will be regulated by the Dubai Financial Services Authority, a regulatory body established within the DIFC. The DME is expected to open for trading in early 2006.
The Exchange and Dubai Holding will each contribute capital and services towards establishing the DME, which will house both open outcry and electronic trading platforms. In addition, NYMEX will contribute software and systems to run the trading operations, including trade entry and risk management systems. The DME will leverage the Exchange's proven expertise in compliance, marketing, research, and information technology to develop DME platform. Trades executed on the DME will be cleared through the NYMEX clearinghouse in New York.
Exchange Chairman Mitchell Steinhause said, "We are committed to the long-term success of the DME and will leverage our expertise in the development of global energy markets to create a state–of–the–art world class commodity exchange in the Middle East."
Dubai presents a unique opportunity for the global energy futures industry to fill a time zone gap in trading between Europe and Asia. "DME will fill that gap by establishing an exchange with products that address the growing needs of the regional market," Mr. Steinhause said.
"This is an important first step towards providing an energy exchange for the greater Middle East region. Our priority now is to build on this agreement and develop a platform for managing risk which reflects the increased financial sophistication of the region's capital markets," said Mohammed Al Gergawi, chief executive officer of Dubai Holding. "For decades, Dubai has played a vital role in trading commodities. By leveraging Dubai's existing infrastructure, DME can serve the greater need of the Middle East energy markets."
"The contracts traded on the DME will be tailored to the needs of the marketplace and may include physical delivery alternatives that represent the physical trade flows," said Exchange President James E. Newsome.