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Abu Dhabi Securities Exchange (ADX) is focusing at this stage to attract more institutional investors to its Exchange Traded Funds’ (ETF) trading platform, according to Elie Ghanem, Director of the exchange’s Market and Product Development (MPD).
Mr. Ghanem made the remarks during the Abu Dhabi City Day Conference taking place in the capital today to discuss the challenges and opportunities for the emirate’s financial sector.
“The platform that ADX provides for ETFs relies on the UCITS regulations, which have been thoroughly tested and provide for excellent solutions for exposure and risk issues. Meanwhile ADX rules and regulations require the appointment of an independent fund administration and index calculation agents; all offering more investor confidence,” commented ADX’s Director of MPD.
ADX was able to launch the ETFs trading platform in March 2010, to become the leading exchange in the region by introducing the platform for this new investment vehicle, and with the infrastructure in place, the challenge now is to increase institutional participation and retail investment.
“For retail investors, ADX will continue carrying out an awareness program to highlight the benefits of ETFs for the low cost associated with their trading, risk diversification and transparency,” Mr. Ghanem explained.
Ghanem emphasized that the ETFs platform represents an essential ingredient for ADX’s initiative concerning the increase of the free float, supporting the exchange’s efforts for delivering the objectives set by the Abu Dhabi Economic Vision 2030 to meet the projections of the emirate’s Policy Agenda.
“It is important for positioning ADX to facilitate market access to international dealers, market makers and authorized participants. In preparation to receive foreign investments when the UAE is classified as an emerging market, ADX will be strengthening the ETF market that would be attractive for tactical and beta allocation,” he added.
Other challenges cited include the absence of a comprehensive domestic regulatory framework for ETFs, whereas the market activity is not tightly regulated and the short selling is not legalized according the Ghanem.
“Up to the day when the regulations for Collective Investment Scheme are in place including provisions for fund administrators and liquidity providers, ADX will continue to accept listing UCITS compliant ETFs,” he revealed.
“What ADX seeks, is to provide investors with a platform that supports risk diversification products whereby ETFs would provide exposure to a particular market at a low cost and this is illustrated by the high correlation between the currently listed EFT and the UAE index, recording an increase of 17.8% in price during the third quarter of 2010, reflecting the appeal of this new investment vehicle,” Ghanem concluded.
