The Dubai Mercantile Exchange Limited (DME) today announced that a trading application based on the state-of-the-art electronic trading technology of the New York Mercantile Exchange (NYMEX), will power the Middle East’s first energy futures exchange.
By leveraging NYMEX’s world class technology system, the DME will be able to operate as a stand-alone entity and provide its customers with maximum access to the Exchange. The technology has a proven track record as a highly reliable trading system and will bring a number of key benefits. These include a seamless interface to NYMEX post-trade processes and a scalable architecture, giving the DME the capacity to increase its product offerings in the future.
The platform, called DME Direct, was developed by NYMEX and is currently being enhanced with additional functionality to enable market participants to execute trades with ease and flexibility. DME Direct will initially be supported and hosted in New York, and will ultimately be migrated to Dubai after the Exchange has been launched. The system will provide for real time reporting of DME quotes and trades to Market Data Vendors through NYMEX’s Price Reporting System (PRS).
The interface to DME Direct will be via the industry standard FIX protocol - FIX 4.2. FIX offers DME customers the flexibility to utilize a trading system of their choice to trade DME products. Traders and Risk Managers will be able to use either their in-house proprietary trading solutions or traditional third party ISV trading system to interface with DME Direct. NYMEX and the DME will be working with DME customers and third parties to facilitate certification and connectivity to the DME.
DME Direct will provide customers with implied functionality and straight-through processing to their back office systems. Order types will include: Limits, Stop Limits, Good Till Cancelled, Good Till Day and Trading At Settlement. In addition, DME Direct will list Futures, Calendar Spreads, Inter-Commodity Spreads and Strips.
Commenting on the announcement, CEO Gary King said, “The introduction of DME Direct underscores our commitment to offering members and customers a state-of-the-art and highly secure trading environment. It has always been a key aim of the partners to create a highly accessible and liquid market for the global energy community to trade Middle East sour crude oil and other energy products. DME Direct will provide us with that capability.”
Using DME Direct, customers will be able to trade the broad range of products being planned by the Exchange. Upon launch of the DME, those products will include the Oman Crude Oil futures contract, Brent – Oman Swap contract and WTI –Oman Swap contract. Soon to follow will be the world’s first jet fuel futures contract in 2007.
All trades executed on the DME Direct will be cleared at the NYMEX AA+ rated clearinghouse. The establishment of an exchange inside the Dubai International Financial Centre (DIFC) and the associated clearing and settlement services to be provided by the NYMEX Clearinghouse are subject to regulatory approval from the Dubai Financial Services Authority (DFSA) and the licensing of the DME as an Authorised Market Institution to operate as an exchange.
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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.
