FTIL in joint venture for Dubai exchange

The Dubai Metals and Commodities Exchange (DMCC), Financial Technologies (India) (FTIL) and the Multi Commodity Exchange (MCX) have joined hands to form the Dubai Gold and Commodity Exchange (DGCX), which will commence operations in the second half of 2005.

The new exchange will be located in the DMCC premises, which is a 400 hectare plot falling under the Jebel Ali free trade zone.

"Setting up the exchange in this region offers the new enterprise a 100 per cent business ownership, a guaranteed 50-year tax holiday and free-hold property options. This also allows for purpose-built infrastructure and the purchase of premises for business purposes," MCX managing director Jignesh Shah said.

DGCX will be a 50:50 joint venture between the DMCC and the FTIL group. Within the latter, FTIL will hold 40 per cent whereas 10 per cent will be owned by MCX.

DGCX proposes to have 6 board members in all, with three from either side. Shah refused to spell out the investment profile of the proposed exchange.

Speaking at a media briefing to announce the partnership, Jignesh Shah, chairman and managing director, FTIL, and managing director of MCX, said, "FTIL will be deploying the complete technology solution platform, and will be further strengthened with the involvement of MCX which will provide the domain know-how."

Later speaking to Business Standard, Shah said he expected to beat MCX's record in setting up an exchange within nine months.

"We are especially proud that we have an international quality national exchange in the MCX and now an international exchange," he said.

DGCX will first roll out dollar-denominated contracts in bullion (gold and silver) and expects to branch out into energy, steel, freight and cotton eventually to offer a balanced portfolio.

"The bourse will fill a critical gap in the geographical distribution of exchanges. Currently, business from the Middle East is routed to either New York, London or Tokyo. Having an international exchange in the Dubai free trade area will fill a gap in the international trading community's requirements," Shah said.

Colin Griffith, executive director of the gold and precious metals sector at the DMCC, said, "The initiative has been driven by the licensed members of the DMCC from the banking, refining and trading segments to offer products aiding arbitrage and hedging to prevent the market participants from unnecessary price exposures."