Dubai's DFM unveils new steps to boost liquidity

Dubai’s DFM unveils new steps to boost liquidity

DFM says new index rules to boost liquidity; Unified price band set for all listed stocks; Bourse to remove 5 pct limit for non-active stocks.

December 26, 2010 1:50 by Reuters

Bourse operator Dubai Financial Market (DFM) will cut the weight of single stocks in the index and adopt a unified price band as part of fresh steps to boost liquidity and better mirror market activity.

DFM, the Arab world’s only publicly listed exchange, said in a statement on Sunday that the maximum weight of a single stock will be lowered to 20 percent from 25 percent currently and it will also limit the percentage of free float shares at 20 percent of the less traded stocks.

The bourse will remove the current 5 percent up and down limit for non-active stocks, like lender Emirates NBD and investment bank Shuaa Capital, to enhance trading activity.

Effective Jan. 2, 2011, all listed securities in the bourse will be grouped under one category and trade at a 15 percent upside limit and 10 percent downside limit for a single trading session.

Builder Emaar Properties holds a 20 percent weightage in the index and is the most actively traded stock in the index, while Dubai Islamic Bank has a 12.6 percent weightage according to the bourse.

In September, DFM said it will switch to a “delivery versus payment” (DVP) system by the first-quarter of 2011, in a bid to get emerging market status from index compiler MSCI.

Last year, DFM bought Nasdaq OMX’s one-third stake in sister bourse, Nasdaq Dubai, with the two markets switching to a single trading platform and synchronised opening hours in a bid to bolster declining turnover.

Dubai’s index is down about 9.6 percent so far this year and slumping volumes in the emirate has forced many brokerages to close operations amid slumping revenues.

(Reporting by Dinesh Nair, Editing by Amran Abocar)