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Rating the exchange

Rating the exchange

The debut of the Bahrain Financial Exchange is another step in the tiny country’s efforts to diversify itself from its neighbors. But is there a demand?

May 7, 2010 10:02 by

The Bahrain Financial Exchange, several years in the making, will finally debut in October of this year. Bahrain has had a stock exchange for years, of course, but the financial exchange will be internationally accessible (one of the most common complaints against the region’s exchanges is the difficulty foreigners have accessing local investments).

The exchange has been in active development for a year, and will feature products and services for both the conventional and Islamic financing sectors. Members of the multi-asset exchange will be able to trade cash instruments, structured products, derivatives, and Shariah-compliant products.

While an exchange could be deemed necessary in order to trade instruments that are more sophisticated than traditional equities, the Bahrain Financial Exchange will introduce yet another level of complexity into the Gulf’s already saturated exchanges market. It is, however, another development in Bahrain’s long history of differentiating itself as a center for finance in the region.

For years Lebanon served as the international gateway to the Middle East. But after the civil war, international players wanting to access Gulf money needed a calmer hub. The tiny country of Bahrain seized the opportunity to fill the gap created by the security threats posed by the Lebanese civil war. And in the 1980s, information technology did not play near the role it does now in finance; the Middle East needed a healthy exchange with people on the floor in order to keep round-the-clock trading going.

But as technology grew to play a bigger role, Bahrain lost its advantage. It remained a gateway into the sometimes complex Saudi market, but turned to Islamic financial instruments in order to attract a different kind of business.

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