CME to push for more DME users

Wednesday, Mar 28, 2012

Gulf News

Dubai The CME Group said yesterday that it will employ its expertise and resources to gain increased regional producer participation in the Dubai Mercantile Exchange, the premier international futures and commodities exchange in the region.

CME Group, the biggest US derivatives exchange operator, doubled its stake in the DME to 50 per cent last month as the Oman Investment Fund, the sultanate’s sovereign wealth fund, raised its stake to 29 per cent. Following the restructuring, Dubai Holding has a 9 per cent stake and 12 per cent is held on a non-voting basis by strategic investors including Vitol, Shell, JP Morgan, Morgan Stanley, Goldman Sachs and Concord Energy.

“The increased commitment of CME Group in DME marks the next phase of development of the exchange as a global marketplace for transparent price discovery for energy products,” said Ahmad Sharaf, chairman of the DME.

Last month saw the exchange trade the highest number of DME Oman Crude Oil Futures (DME Oman) contracts in one month with 107,565 contracts, equivalent to 108 million barrels or 25 per cent of Arabian Gulf crude oil exports to the East.

Volume record

The average daily volume was 5,378 contracts, up 21.5 per cent over the previous record.

The exchange also clocked the single day volume record with 10,142 contracts, 25.6 per cent above the previous one-day volume. CME officials said they expect the trading volumes backed by significantly high physical deliveries to surge further as more regional oil producers and national oil companies (NOCs) begin to recognise DME sour crude as a viable benchmark.

“We have expertise in developing markets and benchmarks. Developing a new market takes a while and we are here for the long term. With a proven benchmark in hand, it is only a matter of time until we reach out to all potential regional markets,” said Kendal Vroman, CME’s managing director, Commodities, OTC [Over the Counter] services and information products. DME has been marketing the Oman contract as a benchmark for markets east of Suez, arguing that much of the world’s crude comes from the region and should be priced in the Middle East. Although the DME has been in talks with a number of regional NOCs, so far it has been unsuccessful in getting the regional sovereigns and NOCs to join the DME platform.

“We will continue to work closely with the NOCs. These are customer-led organisations and eventually they will find value in associating with a proven benchmark.

“Meanwhile we will make our best sales pitch to get them on board,” said Vroman.

DME officials said yesterday that restructuring on shareholding in the exchange will not affect its management structure and it is in the final stages of identifying a new CEO in the place of Thomas Leaver who resigned recently.

“We expect to complete the recruitment process soon and the new CEO to take charge ahead of summer,” said Sharaf.

figures

Exchange trading

50%

CME doubled its stake  in the DME

21.5%

increase in average daily volume over earlier record

By Babu Das Augustine?Deputy Business Editor