Abu Dhabi and Bahrain bourses join hands to boost liquidity

The Abu Dhabi Securities Exchange (ADX) and Bahrain Bourse signed an agreement for greater cross-border co-operation to enhance market liquidity and promote the issuance of low-cost investment vehicles.

The move is part of ADX’s strategy to develop its capital markets by forging partnerships with global exchanges and offering a broad range of products and services to the market.

As part of the agreement, the two stock markets will introduce a number of products and services, including exchange-traded funds, smart order routing and cross-border direct trading, the Abu Dhabi bourse said on Wednesday.

“The alliance between ADX and Bahrain Bourse will further enhance the relationship between the UAE and Bahrain, showcasing the high-growth opportunities on both exchanges and encouraging capital market activity through the introduction of innovative products and services,” said Mohammed Al Hammadi, ADX chairman.

“In turn, this will provide tangible benefits to the economies of the UAE and Bahrain.”

The ADX, region’s second-biggest bourse, is expanding investable asset classes and developing new offerings for regional and international investors as it continues to outperform its peers in the GCC.

The emirate’s stock market had a market capitalisation of more than Dh1.5 trillion ($415bn) as of Tuesday and is up more than 58 per cent this year on the back of initial public offerings, rising foreign investment and higher oil prices.

The bourse set up a derivatives market last week that will allow trading in single stock futures.

It also plans to introduce index futures in the first quarter of 2022, prior to the launch of a wider range of derivative products that will boost market liquidity.

The ADX and the Abu Dhabi’s Department of Economic Development have also submitted a proposal to the Securities and Commodities Authority for a special purpose acquisition company regulatory framework, the first in the Mena region.

“Discussions between the ADX and Bahrain Bourse focused on how we can expand market integration and move forward on joint initiatives such as dual listings, ETFs and market access, which will enhance liquidity in both securities markets,” said ADX chief executive Saeed Al Dhaheri.

“Technology and innovation are at the heart of ADX’s strategy for growth and we look forward to deepening our partnership with other leading regional and global exchanges to bring about mutually beneficial results.”

The two bourses agreed on a strategic plan to introduce new measures over the next nine months to strengthen ties between investors in both countries by enabling the seamless placement of orders on the securities markets while reducing transaction costs, the bourses said.

“Our partnership with ADX will attract new investors and promote a healthy listing deal pipeline,” said Abdulkarim Bucheery, chairman of Bahrain Bourse and chairman of Bahrain Clear.

“Bahrain Bourse and Bahrain Clear’s collaboration with ADX will also support the growth of capital markets in the region and support the diversification of GCC economies.”

The collaboration ties in with the Bahrain Bourse’s “mandate to evolve the Middle East’s capital market ecosystem”, according to Shaikh Khalifa Al Khalifa, chief executive of Bahrain Bourse and vice chairman and managing director of Bahrain Clear.

“We aim to promote the listing of ETFs, enable central securities depository integration in both markets and automate smart order routing systems.”