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Essa Kazim

UAE, DUBAI - Finance

Dreaming IPO

Managing Director & CEO, Dubai Financial Market

Bio

Essa Kazim began his career as a Senior Analyst at the Research and Statistics Department of the UAE Central Bank in 1988, and then moved to the Dubai Departments of Economic Development as Director of Planning and Development in 1993. He was later appointed as Director General of DFM between 1999 and 2006. He is currently a Member of the Higher Board of Directors of the Dubai International Financial Center (DIFC) and the Board of the DIFC Authority, Member of Dubai Council for Economic Affairs, Board Director of NASDAQ Dubai, Board Director of Noor Islamic Bank, Member of the Board of the Rochester Institute of Technology, Board Director of NASDAQ OMX, and Member of the Board of Governors of Hamdan Bin Mohammed e-University.

"We have remained committed to playing a vital role in developing regional financial markets through various initiatives."

In 2011 you drove a merger of the Dubai Financial Market (DFM) and NASDAQ Dubai. What was the strategic driving force behind this move?

Since the inception of DFM in 2000, we have remained committed to playing a vital role in developing regional financial markets through various initiatives. The aim of this transaction was to enhance efficiency and maximize value for all stakeholders by widening DFM’s asset classes, allowing the company’s shareholders to benefit from the future growth of NASDAQ Dubai, and further developing closer operational links between the two exchanges. The current ownership structure creates a dynamic new force in the region’s capital markets and will further strengthen Dubai’s leading role as a center of capital markets and innovation that places the interests of investors, issuers, and brokers first. Undoubtedly, the combined strengths of the two exchanges will help to attract new issuers from across the region and internationally, who can now choose which of the two exchanges is more appropriate for them according to their commercial and regulatory preferences. And as part of the consolidation, DFM welcomed on July 11, 2010, the commencement of the outsourcing of the trading, clearing, settlement, and custody of NASDAQ Dubai securities to DFM’s trading platform. The trading of NASDAQ Dubai securities through DFM’s platform not only provides investors with a wider array of product offerings, it also enables DFM’s solid base of over 567,000 investors to trade in these securities, both of which will further enhance liquidity and activity on NASDAQ Dubai. The outsourcing of NASDAQ Dubai’s trading, custody, settlement, and clearing functions for equities to DFM’s systems in July 2010 was a landmark in exchange consolidation in the GCC. It has improved access for DFM’s individual investors to NASDAQ Dubai by enabling them to trade on both exchanges with one investor number and through the same platform. As a result, DFM’s individual investors now trade in one liquidity pool, from which NASDAQ Dubai’s institutional investors and individuals’ share of NASDAQ Dubai trading has risen significantly.

After some turbulent trading, are you hopeful that there will be some more interest from companies in floating their shares?

Naturally, the primary market is highly correlated to the secondary market, and as we all know the stock markets have been going through unfavorable conditions due to the repercussions of the global economic crisis. Consequently, IPOs went into a period of slowdown over the last three years. However, we have been engaged in continuous discussion with potential issuers, and we can see an enormous backlog that will flow into the market once conditions are more favorable and the business owners realize the possibility to have attractive valuations. According to an independent survey commissioned by DFM, the majority of respondents from private and family businesses were interested in going public over the next two to three years as they acknowledge the importance of tapping into capital markets to fund their expansion plans and sustain growth. Undoubtedly, taking a private company into the public arena is an essential step in the preparation to meet challenges by embracing international best practices in the company’s management, corporate governance, and investor relations. The overall aim of our efforts is to see a better representation of the UAE national economy by attracting companies representing the most dynamic and growing sectors, such as retail, tourism, health care, education, and family conglomerates into our market and diversifying investment opportunities for investors.

“We have remained committed to playing a vital role in developing regional financial markets through various initiatives.”

What initiatives are you undertaking to attract further listings?

Throughout its momentous history, DFM has demonstrated a firm commitment to take the necessary initiatives to strengthen the financial markets sector and has played a vital role in the development of Dubai by offering listed companies a much needed platform to grow. DFM has always maintained close relations with advisory and regulatory partners to highlight the benefits and positive implications of going public and listing. As part of these efforts we have launched the Guide to Going Public, which is a comprehensive guide for privately held and family businesses to see in detail the steps needed to take a company into the public arena. Additionally, we have commissioned an independent international advisor to study the IPO sector and recently we organized an exclusive interactive forum, titled Going Public—Achieving Sustainable Growth, attracting 40 top executives from 30 leading companies. The forum constituted a momentous opportunity for unlisted family and privately owned companies to get a better understanding of the IPO decision framework and identify the key success factors for effective preparation to go public. In the past we have seen many companies reaping the benefits of going public and we are confident that this will increase in the near future. We believe now is the right time for companies to prepare themselves to go public, as we expect the IPO backlog of the past three years will come to fruition once the market sentiment improves.

What new instruments and platforms are being developed to drive the evolution of Dubai’s stock exchange?

DFM spares no effort and takes numerous initiatives to lay out the necessary framework for various market enhancements. As part of these efforts we have shifted to a delivery versus payment (DVP) model to embrace international best practices and we have successfully consolidated with NASDAQ Dubai, creating a larger and unified liquidity pool and diversified asset classes through the trading of NASDAQ Dubai securities on the DFM platform. Recently, this drive was reinforced through the trading of Dubai Gold Securities via our platform as well. As for developments in the near future, we are now in the process of introducing new market enhancements including short selling, securities borrowing and lending, and market making. We are confident that these widely recognized developments over the last two years have set the market on the right track for sustainable growth.

What industries do you believe have the most growth potential in Dubai?

Dubai is gifted with one of the most highly diversified economies in this part of the world with fast growing sectors, including trade, tourism, health care, and education. As our exchange is heavily dominated by real estate and financial listings and the growing sectors of Dubai are misrepresented, we are trying to tackle this issue. As Dubai has managed to build a second-to-none, world-class infrastructure, we believe that the trade and services sectors will continue to drive a strong performance.

© The Business Year – April 2012

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