In terms of commissions, the Abu Dhabi Securities Market (ADX) is the least expensive market in the GCC and MENA region as a result of its latest initiative slashing trading fees by 50 percent.
ADX has announced that the trading fees will be reduced to 0.025 percent from 0.05 percent, marking the exchange’s second fee cut this year and third in three years. The trading fees were reduced in February this year and in July 2019 in the past.
Even trading hours has been increased by one hour in an effort to increase liquidity in the market. Markets will open at 10 am but close an hour later at 3 pm from October 3 in order to align ADX with global trading. Nasdaq Dubai too increased the trade time by an hour.
Interestingly, the reduced fee is lower than international equity markets like New York Stock Exchange (0.036 percent) and London Stock Exchange (0.3 percent).
According to Mutadawil, the Kuwait’s Financial Investment Company’s leading financial brokerage online trading service, the trading fees Bahrain Stock Exchange has the highest fees of 0.4 percent followed by Qatar SE (0.275 percent), Tadawul (0.155 percent), Nasdaq Dubai and Muscat Securities Market (0.5 percent each) and Boursa Kuwait (0.125).
The cost of execution includes several components and depends on the exchange. They include exchange fees, depositary fees, custody fees, brokerage fees, taxes, other fees. ADX has cut exchange fees but these are a small part of the total.
Benefits of liquidity
More liquidity means lower costs of trading for investors and an ability to move more easily in and out of assets, lower price volatility, and improved price formation. Issuers are attracted to more liquid markets, as they reduce the cost of raising capital and produce more accurate share price valuations.
Even the stock exchanges value will go up resulting in greater use by issuers and investors generating immense confidence in luring new stakeholders. This will increase revenues in both ways, one through trading fees and the other enabling the investors by extending their product offering.
This will also contribute to the country’s economy as the companies will have access to capital in the market at affordable interest rates which in turn help them grow their businesses and create employment in the process.
Reducing the fees is one of 50 initiatives under the UAE’s plan entitled “Tomorrow 2021,” which was released by Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed in 2018 to remove barriers in the ease of doing business.
“We have approved a three-year, US$13.61bn budget for the Abu Dhabi Government Accelerators Program Ghadan 21. These 50 initiatives reflect the priorities of citizens, residents and investors,” the Crown Prince tweeted at the time of its announcement.
Market capitalisation
ADX is the second largest exchange in the Arab world after Saudi Arabia’s Tadawul and is owned by the state-owned ADQ holding company. It has drawn up plans to double its market capitalization over the next three years through its new “ADX One” strategy which aims to increase market liquidity and improve market efficiency.
The market capitalisation of the shares listed on the ADX has crossed US$300bn last month and stood at US$371bn at the end of last week. The market capitalization was US$204bn at the end of 2020 and increased by 39.7 percent year-on-year.
On August 4 this year, ADX said that it has listed US$4bn Fixed Rate Notes issued by MDGH GMTN B.V. and guaranteed by Mamoura Diversified Global Holding (MDGH). MDGH is the debt issuing entity of Mubadala Investment Company, and the MDGH bonds have their primary listing on the London Stock Exchange.
Besides, ADX has plans to get at least 10 companies as well as additional services such as derivatives trading by end of 2021. It also expects more listings on its second junior market, after four companies – Sawaeed Holding, Zee Stores, Easy Lease and Palm Sports – merged in 2020.
ADX has reported on the positive impact of the increase in foreign ownership limits of its listed companies. Chimera Capital LLP announced the launch of Chimera S&P UAE Shariah Exchange Traded Fund (ETF), the first ETF to track a Shariah-compliant index in the UAE, which will have its primary listing on ADX.