Dubai Gold and Commodities Exchange (DGCX) established in 2005 has played a pioneering role in developing the regional market for derivatives.
DGCX is a Dubai Multi Commodities Centre (Dubai Government) initiative in partnership with Financial Technologies (India) Limited and Multi Commodity Exchange of India Limited (MCX).
It is an electronic commodity and currency derivatives exchange with 230 members from across the globe, offering futures and options contracts covering the precious metals, energy and currency sectors.
DGCX will launch Indian rupees options contract in September this year extending its rupee derivative offerings. The new contract is scheduled for launch on September 26.
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Although Indian rupee futures contract and gold futures contract are the two most active contracts traded on the DGCX, in a recent interview with Gulf News, Ahmad Bin Sulayem, Chairman of DGCX, said the exchange is fully committed to developing other contracts as viable asset classes.
Gulf News: The volumes have been largely driven by currency contracts and mainly the Indian rupee. What do you attribute this to?
Ahmad Bin Sulayem: Global economic uncertainty has led to steep fluctuations in currencies, prompting investors to hedge exchange-rate risk on DGCX.
The high levels of volatility, coupled with the need to manage counterparty risk have strengthened the value proposition of exchange based foreign exchange (FX) futures trading and encouraged participants to transact on a regulated exchange and clearing house such as DGCX and DCCC.
The rise in currency volumes on DGCX also reflects the growing attractiveness of currencies as an alternative asset class globally.
According to a recent Dow Jones Newswires Analysis, the average daily global foreign-exchange turnover has grown to $4.71 trillion, highlighting how currencies continue attracting liquidity and growing as an asset class despite the uncertain state of the economy.
As for DGCX INR futures (rupee futures), the contract is attracting increased interest and participation globally as market players with business and trade links with India are seeking to hedge their exposure to the rupee.
More and more such players are becoming aware of the DGCX product as the only Indian rupee futures contract offered outside of India, and are finding it a convenient tool to hedge rupee risk.
DGCX is the only regulated exchange outside India which offers trading in the Indian rupee futures contract to international participants and non-resident Indians. International participants are increasingly attracted by regulated and cleared DGCX Indian rupee futures market as opposed to the unregulated over the counter market.
International interest in India's growing economy and currency is increasing across the globe, and this has created more interest amongst entities based in the financial centres of UAE, UK and Singapore in particular.
Another major reason behind the rapid rise in volumes of Indian rupee futures on DGCX is the opportunities that the contract offers investors to gain exposure to the booming Indian economy.
DGCX was launched as primarily a commodities exchange, now as the volumes suggest your business is increasingly driven by currencies. Has there been any change in the focus of your business?
DGCX now sees itself as a multi-product derivatives exchange, offering a wide range of futures and options contracts to manage price risk in today's economy. At inception, we launched our initial line-up of commodities futures products based on the needs of our members and market participants. We believe in constantly maintaining a feedback loop with our members and the market, which allows us to explore the launch of new products. In fact, our business is driven by the needs of our members and their client base. Today, DGCX provides markets in precious metals, base metals, energy and currencies
Is there any reason Silver contracts have been doing extremely well during the first half of the year?
There have been increased levels of silver trading globally over the past year, as silver has grown in its attractiveness among global investors.
This combined with a marked increase in price volatility and tighter prices on DGCX's silver market, has led to an increase in market participation.
You had launched a few cash settled oil futures contracts. How are they performing?
DGCX's WTI crude oil futures are trading 300 contracts per day, equivalent to 300,000 barrels of oil. We believe the contract has significant potential for expansion, and we continue to look at ways to expand volume and liquidity.
Physical gold and jewellery continue to constitute a large portion of gold demand in the region. Increasingly products such as exchange traded funds (ETFs) and plain vanilla gold funds are becoming popular among investors. Is DGCX as an exchange doing anything to attract more volumes in its futures contracts?
Gold futures has been one of DGCX's flagship products since inception. As a UAE delivered 1 kg bar gold contract, it sets a pricing benchmark for gold in the UAE.
Gold ETFs and gold futures answer to differing needs. Gold futures are primarily providing a tool to manage price risk, while Gold ETFs and funds are investment instruments.
A gold futures contract is a means of hedging price risk exposure during volatility allowing participants to profit when the market moves in either direction.
Other than the gold futures contract, are you looking at any other gold derivatives to be traded on the exchange?
At present, DGCX offers trading in both gold futures and options contracts. We have no plan to list any further gold products.
No plans to delist
Dubai Gold and Commodities Exchange (DGCX) affirmed that it has no immediate plans to delist or discontinue any of its existing contracts despite the speculation around some of the contracts trading relatively lower volumes
"DGCX has no plans to delist the steel rebar or oil futures contracts, we believe these contracts have potential to grow and we shall be looking at taking necessary steps to enhance their performance. As part of this process, we are talking to members and other market participants to understand their views on enhancing these contracts," said .
"We do review all our contracts from time to time and this exercise is undertaken for the entire spectrum of commodity and currency products that form our portfolio," said Ahmad Bin Sulayem, Chairman of DGCX.