Dubai Mercantile Exchange IPO?

[sharewadi]

Hmmm... it seems a bit of a stretch to get from the DME Chairman's comment to considering an IPO. But that's what makes headlines. I wonder if we'll see further comment from the DME denying the IPO rumours? See also...

DME record volume - on 2nd day

Associated Press 11 June 2007:

Dubai Mercantile Exchange hopes to consolidate regional exchange activity DUBAI, United Arab Emirates: Fresh from launching this month, the Dubai Mercantile Exchange (DME) could launch an initial public offering if its Middle East crude oil futures contract is a success. The exchange is also looking at consolidating regional commodities futures activity. "I would see our exchange to be quite a large company shortly, once the crude contract takes off" and a planned jet fuel contract comes on line, DME Chairman Ahmad Sharaf told Dow Jones Newswires in an interview Monday. Asked if the exchange was considering listing shares on a stock exchange, Sharaf said "the board has discussed it," but declined to say more on the topic. The DME is the latest in a long line of attempts to launch a benchmark Middle East sour crude futures contract, and its owners are hoping the decision of both the Oman and Dubai governments to price their oil production off the new futures will bring success where others failed. Sharaf said that the exchange's first week volume exceeded expectations and that he is confident of success. He declined to give any estimation of future earnings or growth projections for the new exchange, which is jointly owned by the Dubai and Oman governments and Nymex Holdings Inc., owner of the New York Mercantile Exchange. The exchange started trading Oman sour crude futures on June 1. The Dubai exchange, which is a wholly electronic bourse, also sees the chance to be a major player in consolidating the region's commodity and energy exchange activity, especially due to the liquidity provided by Nymex. Sharaf said that, in the next three months, he hopes to talk to energy producers in the region that are looking at futures contracts. "We are looking at opportunities by which we can leverage products that other countries can do (as futures)...we could help do that if we have a marketplace here," Sharaf said. "You're not going to be able to create two or three market places around similar products." Sharaf said the exchange hopes to launch a jet fuel future contract this year and has started preliminary discussions on instituting a liquefied natural gas, or LNG, futures. This comes as a new exchange readies to launch in Qatar. Qatar recently overtook Indonesia as the world's biggest LNG exporter, according to the U.S. Energy Information Administration. "At some point it would be appropriate for us to have a discussion" with Qatar's planned International Mercantile Exchange, Sharaf said. The Dubai exchange is also considering other commodities outside energy. "We will also look at some of the other contracts, metals, whether it's aluminum, gold, silver and so on," Sharaf said. The Oman crude contract had modest volumes in its first week, with 6,250 contracts traded on the busiest day, which was Thursday. That compares with volumes of more than 200,000 in IntercontinentalExchange Inc.'s Brent crude, the European benchmark. DME is also offering spread contracts, giving traders the chance to trade on the price difference between Oman crude and European and U.S. benchmarks. Sharaf said that about half the DME's volumes have been traded during U.S. business hours, with activity during Asian hours being slower than in the U.S. and Europe. Singapore traders are considered important for the success of the contract, with a large proportion of Middle East crude exports sent to Asia. "We know the trading culture in Asia and we were expecting this — Nymex has seen that Asia tends to follow as liquidity builds in Europe and the U.S.," Sharaf said. "We're going to work very aggressively with the traders in Asia to get them comfortable with the contract" with roadshows and possibly training courses, he added.

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[sharewadi]

Well, the first statement from the Chairman is clear enough, but then he seems to back away from his initial comment.

Reuters 12 June 2007:

Dubai Mercantile Exchange says IPO an option DUBAI - The Dubai Mercantile Exchange (DME) is considering an initial public offering as one of its options for future growth, the DME chairman said on Tuesday. The DME, backed by the New York Mercantile Exchange, launched on June 1 with its debut futures contract in Oman sour crude. The Dubai exchange is competing for the sour crude futures market with the Atlanta-based IntercontinentalExchange, NYMEX's principal competitor. "An IPO of the DME may be an option for the future," DME Chairman Ahmad Sharaf told Reuters. "However, it is still early days for the exchange and we are focusing on growing the business. At this point, no decision has been made on possible timelines for any potential IPO or, indeed, whether an IPO will actually take place." The DME is working to build trading volumes in its Oman futures, as it looks to avoid the fate of several previous failed attempts on other exchanges to launch high-sulphur, or sour crude contracts. The Oman contract is the latest attempt to provide a futures link to crude supply from the Middle East. The region provides more than 30 percent of the world's 85 million barrels per day (bpd) crude oil and much of it goes to Asia. But the contract has yet to attract much volume from Asian refiners, and sees most activity during New York trading hours. DME Chief Executive Gary King said on Tuesday that he expected volume to pick up next month once traders are more familiar with the exchange's settlement procedure. The exchange was also working on a jet fuel futures contract for launch before the end of the year and has previously said it is looking at futures contracts outside of the energy sector. Dubai's state-owned Tatweer and the NYMEX each own a 32.5 percent stake in the DME. The Oman government has 30 percent and the remaining 5 percent stake is held by DME floor members.

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[sharewadi]

This morning James Newsome was being interviewed on Dubai Eye's Business Breakfast about the DME gold future contracts they're planning to launch.

Mr Newsome is president and chief executive of the NYMEX, and board member of the DME.

I wasn't concentrating fully but did anyone else listen and hear him say they were going to take the Dubai Mercantile Exchange (DME) public at some time? Or was he talking about the New York Mercantile Exchange (NYMEX)?

For some interesting background, check out a book called "Rigged", about the DME.
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