NYSE Euronext makes major investment in Qatar Exchange
NYSE Euronext, owner of the New York Stock Exchange, announced last Friday that it has taken a $200 million, 20 percent stake in the newly created Qatar Exchange, an exclusive partnership with the State of Qatar. In April, NYSE Euronext had said it was restructuring its previously announced strategic partnership to build a new cash and derivatives exchange in Doha. The result of these efforts is the Qatar Exchange, the successor to the Doha Securities Market (DSM).
The new exchange will provide a range of products across multiple asset classes - including derivatives and commodities from the NYSE Euronext stable of products that includes LIFFE futures.
Qatar Financial Centre (QFC) stands to benefit strategically from the deal, as the revamped exchange will attract brokerages, specialists in custody services, and other professional services providers to cater for the greater depth of financial products. The deepening sophistication of products on offer will also provide greater flexibility to investors and companies alike.
Major Qatari companies, such as United Development Company (UDC), will be able to take advantage of additional risk management tools that the DSM had not been able to offer historically. According to Khalil Sholy, President and Managing Director of UDC, the timing is right. “Qatar is built on solid economic fundamentals and is one of the (countries) least affected by the global crisis. And future opportunities are very significant - what we have seen over the last five years is remarkable.”
Earlier plans to have a single financial regulator bringing banking supervision and market regulation under internationally recognized standards are yet to be implemented but are likely to be realized soon, according to Stuart Pearce, Chief Executive Officer and Director General of QFC. He said the deal with NYSE Euronext makes Qatar Exchange the only exchange that has a management team from another exchange running daily operations, making it an attractive place to list.
Until the move to a single regulator is implemented, Qatar Exchange will continue to be regulated by the Qatar Financial Markets Authority, a separate jurisdiction from QFC. Clearly, a single regulator that allows QFC licensed firms’ direct access to the exchange will positively impact trading and attract new companies to QFC.
The deal with NYSE Euronext is something of a blow for the London Stock Exchange, which has failed to get a foothold in the increasingly important Middle East market. On the other hand, U.S. and European exchanges have been quick to recognize the relationship between financial services and the rapid diversification of Gulf economies. The NYSE Euronext deal, the largest investment in a foreign exchange by the combined group, is a clear reflection of this U.S.-European interest – and likely a harbinger of more U.S. and European deals to come.