SINGAPORE/DUBAI, (Reuters) – The Dubai Mercantile Exchange (DME) has enlisted six international energy traders and investment banks as new co-owners to help it attract liquidity, selling them up to 20 percent in the exchange, it said on Monday.
The DME, a joint venture between Oman, Dubai and the New York Mercantile Exchange, sold stakes to Morgan Stanley, Goldman Sachs, Concord Energy, oil trader Vitol, Chicago-based Casa Energy Trading, and a company owned by Royal Dutch Shell, it said in a statement.
“We look forward to leveraging these new relationships to expand and diversify our customers base,” said Ahmad Sharad, Chairman of the DME, but declined to give the financial details of the sale.
The DME declined to specify whether the six new shareholders held the total 20 percent stake, or if other parties may also be involved.
NYMEX, Dubai’s state-owned Tatweer and the Oman government now each owns 25 percent of the DME, while DME floor members continue to hold the remaining 5 percent, DME Chief Operating Officer Thomas Leaver told reporters in a conference call.
The DME launched trading in June 2007 with a sour Middle East crude futures contract, aiming to become the benchmark for pricing in the world’s top oil exporting region.
But volumes on the flagship Oman contract have failed to take off and physical delivery has been high, showing that many traders used the exchange as a means to buy and sell physical Oman crude, rather than to speculate on future prices or hedging their exposure.
Even the introduction of two financial contracts has not made much difference.
NEEDS LIQUIDITY
The physical contract has survived longer than past attempts to launch sour crude futures, but has yet to establish itself as a viable benchmark for the vast and growing exports of Middle East crude to Asia.
“They really needed to create some liquidity. Bringing in these guys may be a start,” a trader said.
“A successful and liquid futures exchange linked to energy products in the region will help us to better manage some of the risks inherent in our own business and those of our clients,” said Goran Trapp, head of commodities for Europe, Middle East and Africa for Morgan Stanley. ”
NYMEX reached a deal in March to merge with the CME Group Inc, the world’s largest derivatives exchange. One source said in May the DME would like to push through the stake sale before the CME merger was completed.
NYMEX Chief Executive James Newsome told Dubai Eye radio on May 13 that the DME was also considering an initial public offering as one of its options for future growth.
The company declined to talk about that on Monday.
“They have not ruled out an IPO yet, but they want to see first what is the outcome of this stake sale,” an industry source said.
“But many doubt that their move will bring liquidity to the contracts, and maybe it will if the new shareholders were asked to pump up liquidity,” he said.