The Dubai Mercantile Exchange Limited (DME) today announced plans for its membership structure and the criteria that will be used to attract and establish a mix of local, regional and international market participants on the trading floor of the new electronic exchange.
Speaking at the first in a series of ten international DME seminars for potential customers, Chief Executive Gary King revealed that the Exchange anticipates having three classes of membership: Floor, Off-Floor and Clearing Members.
Floor members: will be those entities that physically occupy one or more of the 50 seats located on the DME’s trading floor. Importantly, through the purchase of seats on the Exchange, Floor Members will be entitled to preferential membership rates. Member margins, as determined by the New York Mercantile Exchange, Inc. (NYMEX) where all DME transactions will clear, will also apply.
Off Floor Members: the DME will also make 50 Off-Floor Memberships available. These will be offered to selected qualified applicants at a fixed price and will entitle them to preferential member rates and margins. An Off-Floor Member will not have to be physically located in the Dubai International Financial Centre (DIFC), the financial free zone in which the DME is incorporated. A DME Member may execute contracts from other jurisdictions providing that they meet the relevant Exchange and regulatory requirements.
Clearing Members: trading at the DME will not be limited to Members, but all market participants will be required to hold a futures account with a Clearing Member. Should they choose, all current NYMEX Clearing Members will have the ability to clear DME transactions subject to complying with any relevant requirements. The AA+ rated NYMEX Clearinghouse, comprised of more than 40 of the world’s leading financial institutions, is processing an average of one million contracts per day during 2006, and will help to ensure the financial integrity of the DME.
Commenting on the announcement, Mr King said:
“This is a critical step for the DME. The foundations of the Exchange are being established and now we are delighted to announce its structure and means by which membership to the Exchange will be established. We are making every effort to ensure that a highly liquid market is created and that we have an active energy trading community on the floor of the DME.”
The process and criteria have been determined by the DME’s internal Membership Committee to make certain that the awarding of memberships is conducted with maximum transparency. In addition to applying to the DME, all Members would have to undergo the appropriate process with the Dubai Financial Services Authority (DFSA), the regulatory body which would have oversight of the DME. The establishment of an exchange inside the DIFC and the associated clearing and settlement services to be provided by the NYMEX Clearinghouse are subject to regulatory approval by the DFSA and the licensing of the DME as an Authorised Market Institution to operate as an exchange in the DIFC.
The introduction of the membership process represents another major step in the creation of the region’s first international energy exchange. The DME is expected to launch in the fourth quarter of 2006, and will initially trade the Oman Crude Oil Futures Contract.
Earlier this year, the Exchange announced its unique hub concept, which will see the establishment of two, four and six-seat trading clusters on the DME floor. Each seat within a hub containing all the necessary hardware for traders to execute trades electronically. Floor Members will be able to apply for hubs during the membership application process. The DME is the first exchange to introduce this innovative format.
The DME has already received significant interest from local, regional and international market players and is expecting demand to far outstrip available memberships. Application forms will become available from the DME Membership Department and will be provided to potential candidates upon request. Interested parties should visit the DME’s website at www.dubaimerc.com to express their interest.
The Singapore seminar, the first stop in the international education seminar series, aims to build awareness of the DME, the Oman Crude Oil Futures Contract, and other key elements of the Exchange. The seminar series will take representatives of the DME and NYMEX to key financial centres in Asia, Europe, North America and the Middle East. Following Singapore, free seminars will be held in Hong Kong, Tokyo, Mumbai, Chicago, New York, Houston, London and Muscat before concluding on the 14th of November in Dubai.
The Dubai Mercantile Exchange Limited’s (DME) establishment of an exchange inside the Dubai International Finance Centre (DIFC) is subject to regulatory approval from the Dubai Financial Services Authority (DFSA) to be licensed as an Authorised Market Institution to operate as an exchange inside the DIFC. Furthermore, all clearing and settlement services to be provided by the New York Mercantile Exchange to DME are subject to the New York Mercantile Exchange becoming recognised by the DFSA to operate a remote clearinghouse in the DIFC and subject to the review and / or approval of the Commodity Futures Trading Commission. Until the above regulatory approvals have been granted, no trading on the DME will be permitted and no person will be admitted as a member of the DME.
About the Dubai Mercantile Exchange
The Dubai Mercantile Exchange Limited (DME), a joint venture between the New York Mercantile Exchange, Inc. (NYMEX) and Tatweer, aims to become the premier commodity and energy futures exchange in the Middle East, providing a financially secure, well-regulated and transparent trading environment.
Expected to launch in the fourth quarter of 2006, the Exchange will initially develop and trade an Oman Crude Oil Futures Contract. This will address a growing market need for price discovery of Middle East Sour Crude Oil while simultaneously bridging the time zone gap between Europe and Asia by providing for the trading of energy futures, options and other products.
The DME will be a fully electronic exchange. However, in a unique concept, it will also bring together a community of traders that will operate from trading hubs and individual trading stations on the Exchange’s floor, which will be located within the Dubai International Financial Centre (DIFC), the region’s leading financial services centre.
The DME will be regulated by the Dubai Financial Services Authority (DFSA), a world class, independent regulator and all trades executed on the Exchange will be cleared through, and guaranteed by, NYMEX’s AA+ rated clearinghouse.
