Last week witnessed an impressive gathering of exchange CEOs and senior market and technology practitioners from across the Middle East and North Africa (MENA) at the Arab Federation of Capital Markets’ (AFCM) annual conference. At the event – this year in Doha, Qatar, and hosted by AFCM general secretary Rami El-Dokany – leaders met to debate the future of technology in capital markets and to further deepen cooperation across the region.
Many Middle Eastern countries have government-led ‘Strategic Visions’ to build the strength of their countries and to diversify from pure natural resources as the primary driver of their economies. One key goal for the region is to grow financial markets, both through attracting foreign investment and widening retail interest in the local markets, while supporting private issuance.
Governments also aim to diversify the product offering, with the goal of the GCC becoming a hub for asset management, plans for developing derivatives markets, growth in the bond markets through the introduction of Sharia-friendly Sukuk bonds. The ambition is palpable.
Central Role for Technology and DataTechnology lies at the heart of these plans, with a spotlight on issues of capacity, regulatory frameworks, digitalisation and connectivity, leveraging AI, and settlements.
At the AFCM conference, there was representation from many of the central banks and regulatory bodies at the event, who appear to be taking proactive approaches to designing regulations in order to support the growth of financial markets. Still in the relatively early phase of this transformational journey, the region is keen to leverage best practices and frameworks from across other regions. Qatar, for example, is adopting English Common Law for the rules and regulations around operating a company in the country so that it is easy for foreign companies to do business there, while others are examining legal environments for structuring financial vehicles from countries such as Luxembourg, Jersey or the Cayman Islands.
The importance of high-quality data to support these growth plans is recognised, particularly as attention is turning to the potential and pitfalls of AI. The opportunity for packaging exchange data was also noted, for example, by the Botswana Stock Exchange where Thapelo Tsheole, the CEO, said that data sales both drives wider interest in trading on their exchange, but has also transformed into a ‘significant revenue stream’ for the exchange. He said this is the case for many exchanges in Africa and that the digitalisation of trading systems enables them to segment and tier the data to suit various client needs.
ESG was also highlighted as an important initiative by many of the central banks and exchanges, again driven by the desire to be appealing to foreign investors seeking such standards. A panel delving into the ISSB standard looked at how proactive exchanges, such as the Amman Stock Exchange (ASE), have been in terms of putting enforcement rules in place for their listed companies to issue sustainability reports, and has conducted a wide programme of education among its listed companies to help them achieve this goal. This is also an important issue for African exchanges. Indeed, four exchanges – the Amman Stock Exchange, Bahrain Bourse, Muscat Stock Exchange and Palestine Stock Exchange – signed MOU’s in a ceremony with the AFCM to join the Net Zero Exchange Group, showing their commitment to sustainability.
The topic of institutional digital assets was also discussed in a panel. Similar to other regions, the challenge lies in the lack of regulatory frameworks as well as the volatility which prevents institutions from being active. That said, the United Arab Emirates (UAE) has been leading the way from a regulatory perspective with both Dubai and Abu Dhabi establishing dedicated regulatory institutions for digital assets, in an effort to drive innovation and have an edge in building an institutional market in digital assets.
Pan Regional DMA
Possibly the most interesting initiatives discussed were efforts in the Middle East and separately, Africa, to create a pan-regional single point of access across multiple regional exchanges.
Following the example set in China, the Tabadul initiative has a vision to connect all the exchanges in the Middle East. It was launched by Abu Dhabi Securities Exchange and joined by the Bahrain Bourse to execute its first trade back in July 2022, and has since grown to have 11 trading members, offering access to 240 listed firms, with a marketplace of 3.8 million investors. New members onboard or coming on board soon including the Astana International Exchange, the Cairo and Alexandria Stock Exchange, and the Tajikistan and Uzbekistan exchanges.
The vision for Tabadul was driven by the ambitious CEO Saker Asllan, who, when he worked at Morgan Stanley in London overheard a larger investor keen to invest in two instruments but realising the cost of the operation was prohibitive and instead shifted his attention to a more accessible option. As such, Tabadul offers single Direct Market Access (DMA), which reduces the cost and friction of cross-border trading and is highly attractive to market makers, which opens up the market to foreign investment, drives growth and capital flows into local businesses. Tabadul has secured the support of local regulators to help support this initiative, and allows each exchange to maintain its own rules and does not charge commission.
Similarly, the African Exchanges Linkage Project (AELP), borne out of the African Securities Exchanges Association (ASEA), aims to bring exchanges together to increase liquidity in local markets through harmonisation of infrastructure, as well as making market data available to increase awareness of its markets amongst global investors. It currently has 26 members including exchanges and regulators. The longer-term vision, according to project manager Lina Tonui, is the “dream of a Pan African Stock Exchange”. There was even suggestion of exploring the link up between Tabadul and AELP at the conference.
Tracking future trading technology developments
What will be interesting is to track how the market develops and adopts trading technology services to help them advance the region’s capital markets. With a view toward helping share knowledge from experienced practitioners and vendors from across Europe and the US into the Middle East, A-Team is thrilled to be partnering with AFCM to bring a TradingTech Summit MENA to Dubai. We’re aiming for a November event to deliver a deeper dive into the technology for capital markets across the MENA region. If you’re interested in taking part from a speaking, sponsorship or delegate point of view, please do get in touch with us at barry@a-teamgroup.com.
Subscribe to our newsletter
