UAE. Dubai Gold and Commodities Exchange (DGCX) plans to launch more new products in 2009 as high market volatility boosts the need for risk management products, the CEO of the Exchange said.

DGCX has a wide variety of commodity derivatives including gold, oil, steel and currency futures and is aiming to become a major commodities centre in the region.

Malcolm Wall Morris said late on Tuesday that total turnover at the exchange rose 30% by end-November to exceed 1 million lots and entire 2007 turnover. Despite predictions of another volatile year in financial markets, he was optimistic.

“We are only touching the surface of the demand for commodity derivatives in this region,” he said, adding they were aiming to launch new products next year. But he declined to provide details on the type of product or the exact timing. “We’ve got clear demand from our clients,” he said.

Morris said the tightening in credit highlighted the importance of having a counterparty in financial markets and the increased necessity of risk management instruments.

It is increasingly difficult to get a trusted counterparty to hedge against price volatility, he said.

The Exchange is the only one in the region to operate a clearing house, the Dubai Commodities Clearing Corp, fully owned by the DGCX.

The gold contract launched in 2005 continues to be the Exchange’s locomotive product, accounting for around 70% of the business, while Morris said he was happy with the performance of oil and currency contracts too.

“The crude oil contract was the most successful contract in the Exchange’s history. On day one we have achieved just over 3,000 contracts. This impacted our business this year,” he said.

DGCX launched Dubai West Texas Intermediate crude and Dubai Brent crude in May to allow funds in the world’s top oil exporting region to invest in oil futures without taking money elsewhere.

However, the Exchange’s international rebar futures contract has not traded since end-September.
Morris does not think there is anything wrong with the design of the contract.

“The steel industry....has not had much if any exposure to using derivatives instruments,” he said. “When you launch embryonic products it is going to take time to get the products to work,” he said.

Steel has become one of the most popular industrial raw materials and several exchanges have provided risk management tools for.

The London Metal Exchange (LME) has introduced its physically deliverable contracts earlier this year, while the Chicago Mercantile Exchange (CME) followed it in October with index-based hot-rolled coil contracts.

Steelmakers in the US$800 billion industry have largely opposed the contracts as they challenge their pricing power.

“With steel, correlation with the physical market is very good and now we have to turn that correlation into business,” he said.

• Top news
• Business News
• Company News