DIFX to be ‘stricter’ than DFM

THE DUBAI International Financial Exchange (DIFX) — due to open later this month — will have stricter regulatory controls than the recently breached Dubai Financial Market (DFM), according to one of the exchange’s top bosses.

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By  Rhys Jones Published  September 11, 2005

“I think controls at DIFX will not only be more sophisticated than those in place at DFM, but better than those in the region as a whole,” said Habib Al Mulla, the man implementing the regulatory laws at DIFX. “The whole purpose of having DIFX is for it to be a pioneer,” he added. Over US$2 billion-worth of trading on the DFM was wiped out late last month because of the manipulation of Dubai Islamic Bank (DIB) shares when an entire month’s worth of share dealing was ploughed into the company in a single day. The DIFX, according to its chief executive Steffen Schubert, is in talks with regional companies with a potential market capitalisation of more than US$100 million, mainly from the Gulf and wider Middle East, including Egypt, Jordan, Lebanon and Turkey. DIFX also says that state-owned firms in Dubai are in talks with it over using the exchange as a platform for privatisation. As such, rigorously implemented trading rules will be in place at DIFX to make sure there isn’t a repeat of the DFM scandal. “I would be extremely surprised if something of this nature happened at DIFX because we have built on the international expertise we have and we have people who have managed to deal with these kind of situations in the past,” Al Mulla explained. “We have also built a sophisticated trading system and sophisticated regulations. Of course, anything is possible, but I think the chances of something of this nature happening at DIFX would be extremely remote,” he added. The Dubai International Financial Centre Authority (DIFCA) recently released for public comment two draft laws relating to securities investment, personal property and insolvency matters within the DIFC. The DIFCA is responsible for the development and administration of these laws as they relate to general and commercial matters. The DIFCA wants comments from the international financial and legal community prior to the submission of the proposed laws to the DIFCA board of directors for recommendation of the laws to the DIFC president, Sheikh Mohammed Bin Rashid Al Maktoum for enactment. The draft legislation is the next stage in completing the legal framework that will govern the operations of the DIFC. Al Mulla claims that DIFX is on course to open for trading by its self-imposed deadline of the end of this month, although DFSA has yet to award it an operating licence and DIFX is yet to announce any companies that plan to use it to list.

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