Market infrastructure – United Arab Emirates (Nasdaq Dubai)

04.12.2023

Institutions and organisation

Nasdaq Dubai (www.nasdaqdubai.com)

Dubai International Financial Exchange (DIFX) commenced operations on 26 September 2005 and provides a regional stock exchange for the Gulf; it was renamed Nasdaq Dubai on 18 November 2008.

Nasdaq Dubai, located within the Dubai International Financial Centre (DIFC – www.difc.ae ), is a federal tax-free zone where financial companies operate under an independent regulator. It has been granted authority to self-legislate in civil and commercial areas by the United Arab Emirates (UAE) government and operates independently from the domestic stock exchanges located in Dubai and Abu Dhabi.

Nasdaq Dubai-eligible securities are USD and AED denominated, although there are plans to list securities denominated in EUR or GBP. Securities are held in book-entry form.

Central Securities Depository (CSD)

Owned and operated by Nasdaq Dubai, the CSD performed the clearing and settlement functions for trades executed on Nasdaq Dubai and functioned as the central registry following its launch in September 2005.

Nasdaq Dubai has outsourced the trading, clearing, settlement and custody of ordinary shares, depository receipts (DRs) and exchange traded funds (ETFs) to the Dubai Financial Market (DFM), for an undefined period from the 27 June 2010.

Responsibility for the safekeeping and custody of debt securities and collective investment funds listed on Nasdaq Dubai has remained with the CSD.

Despite the outsourcing arrangement with the DFM, Nasdaq Dubai continues to operate as a separate market and retains its own business rules, listing rules and its “Official List of Securities”. Nasdaq Dubai continues to be regulated by the Dubai Financial Services Authority (DFSA) and all transactions will continue to be governed under Dubai International Financial Centre (DIFC) law.

Clearstream's sub-custodian may hold Nasdaq Dubai-eligible securities on behalf of Clearstream in an omnibus account at the CSD.

Dubai Financial Market (DFM)

A local, domestic stock exchange in the United Arab Emirates.

Following regulatory approval, Nasdaq Dubai was given permission to outsource the trading, clearing, settlement and custody of ordinary shares, DRs and ETFs to the DFM.

Regulatory structure

Securities & Commodities Authority (SCA)

The SCA has been eager to put into effect the objectives stated in the Federal Laws and has spared no effort to strengthen the legislative structure through issuing such regulations and instructions that ensure the development of the organisational and supervisory framework of the list of joint-stock companies and other companies operating in the securities field. In addition, the Authority has introduced some controls and criteria that would contribute positively to enhancing the investors' trust in the Authority.

Dubai Financial Services Authority (DFSA) (www.dfsa.ae)

DFSA is the integrated regulator of all financial and ancillary services undertaken in or operating from the Dubai International Financial Centre (DIFC). It oversees the following financial services provided by DIFC:

  • Wholesale banking and asset management;
  • Reinsurance;
  • Islamic financial business;
  • Securities, derivatives and commodities exchange activities undertaken by exchanges including Nasdaq Dubai;
  • Legal, accounting, compliance and market information services.

DFSA has four primary functions:

  • Rule-making and developing policy practices;
  • Authorisation, licensing and registration of market participants;
  • Supervision of authorised, licensed and registered DIFC participants;
  • Enforcement of legislation.

The DIFC Judicial Authority (DJA) supervises the enforcement of regulations. DFSA became a signatory to a multilateral Memorandum of Understanding (MoU) with the International Organisation of Securities Commissions (IOSCO), making it the only regulator in the Cooperation Council for the Arab States of the Gulf (GCC) and the first among Arab nations to be admitted as a signatory. Nasdaq Dubai's initiative to outsource the trading, clearing, settlement and custody of ordinary shares, DRs and ETFs to the DFM required the consent of the DFM's regulator – the Securities and Commodities Authority (SCA). The DFM's activities continue to be supervised by the SCA.

Nasdaq Dubai is regulated by the DFSA and is established under and subject to the following legislation:

  • Regulatory Law 2004;
  • Markets Law 2012;
  • Law Regulating Islamic Financial Business 2004;
  • Collective Investment Law 2010;
  • Investment Trust law 2006.

Central Bank of United Arab Emirates (www.centralbank.ae)

The Central Bank of UAE formally commenced its functions on 11 December 1980 under the Union Law No. (10) 1980. It performs the traditional functions of the majority of central banks. The Central Bank is ultimately responsible for supervising licensed banks and financial institutions in the UAE.

Currently, for the purpose of clearing and settlement at Nasdaq Dubai, there is no central bank. SCB has been nominated as the clearing bank and it performs this function as a “central cash clearer” or “quasi central bank”.