Trading on Dubai's two commodity exchanges has reached record levels this year, underscoring the emirate's position as the regional centre for hedging prices and forming a new pillar in a diversified economy. Average volumes on the Dubai Gold and Commodities Exchange (DGCX) have recovered to pre-crisis levels and hit an all-time daily record of more than 19,000 trades last Monday.
Last month's 146 per cent increase in volumes compared with February last year was driven by greater interest in futures contracts for gold and currencies, the DGCX said. The Dubai Mercantile Exchange (DME) had a record level of open interest - the number of futures contracts outstanding - at the end of last month of almost 20,000, up from 16,000 for the same time last year. Oil trading volumes in Dubai overall gained 69 per cent last year, in part because the Government boosted the visibility of the Oman oil contract by linking the price of its own crude to the contract's settlement price.
Dubai was still not a rival to the most established trading centres in the world, but the two exchanges were "on the right path" to advancing the city as a centre for trading gold, oil and currencies, said John Samuels, the chairman of the Dubai oil trading company Translux. "Dubai is way ahead of other locations that are serious 'contenders' to become commodity hubs because its infrastructure and location are far superior to any place else, in the Gulf or elsewhere," said Mr Samuels, a veteran of the emirate's commodities sector.
"All of this demonstrates that Dubai need not rely as heavily on real estate as it has in the past because the trading hubs that have been created are finally beginning to work." The DGCX started operations in 2005, while the DME launched in 2007. Futures contracts for gold, currencies and oil have been buoyed by interest from Indian traders, Mr Samuels said. The DGCX had experienced growing interest in future contracts for currencies and gold in the past six months, said Eric Hasham, the chief executive of the exchange. "High levels of price volatility, coupled with a greater focus on currencies as an asset class in the region, have supported overall volume growth on the DGCX," he said.
But to compete with the world's largest centres, Mr Samuels said Dubai would need to develop a stronger banking system to finance larger commodities trades. cstanton@thenational.ae