CME Group, the world's leading and most diverse derivatives marketplace, and Oman Investment Fund, a sovereign wealth fund of the Sultanate of Oman, are to increase their investments in the Dubai Mercantile Exchange to enable it to continue growing its business.
As part of the restructuring of the DME's equity shareholding, a recapitalization arrangement will increase the stake in DME held by CME Group's NYMEX division from 25 per cent to 50 per cent. Oman Investment Fund will increase its holding to 29 per cent; a subsidiary of Dubai Holding will retain 9 per cent; and 12 per cent will be held on a non-voting basis by strategic investors, including Vitol, Shell, JP Morgan, Morgan Stanley, Goldman Sachs and Concord Energy.
Bryan Durkin (pictured), CME Group Chief Operating Officer and Managing Director, Products and Services, says: "The deepening of our relationship with DME further serves our strategy of providing risk managers and investors with access to key benchmark products via our global distribution networks. By committing CME Group's resources and know-how to DME's increasingly well-received product set, participants in the Middle East and Asia will be able to access transparent pricing and risk management products as global energy markets focus ever further eastward."
Hassan Al Nabhani, Chief Executive Officer of Oman Investment Fund, says: "DME's development into a prominent venue for price discovery will prove to be of significant strategic and financial value for the oil markets. The exchange continues to attract customers from among the key participants in the global energy industry. Our long-standing partnership with CME Group, the world's leading derivatives marketplace, is building the platform for the next phase in DME's development."
Ahmad Bin Byat, Chief Executive Officer of Dubai Holding, says: "Our partners' increased investment in the DME is a vote of confidence in the future growth of the exchange. Today's announcement marks a new phase in the development of the DME and we look forward to building on the real progress which has been made to date."
Ahmad Sharaf, Chairman of the DME, says: "We welcome the continued commitment of our partners. With liquidity in the flagship Oman crude oil futures contract steadily growing and physical delivery reaching new heights in 2011, this recapitalization positions the DME to enter the next phase of development for existing and future customers seeking to manage price risk for crude oil markets East of Suez."
To build on the success of the partnership to date, the new arrangement puts a robust plan in place to grow the business and ensure that it continues to deliver value to its customers and investors. With the injection of new funds, the DME will retain its independence while benefiting from technology updates, product development support, technical services and CME Group's skills and expertise in developing global markets.
In 2011, the DME delivered more than 145 million barrels of crude oil - a year-on-year trading volume growth of 19%. Average Daily Volume (ADV) rose to 3,505 contracts, peaking at 4,427 in July, representing the highest monthly ADV since the DME began trading in 2007. New records in total volume were also set in consecutive months during July and August, the latter seeing 95,440 contracts traded. Physical delivery of the DME Oman contract also grew through 2011, with an average of 12.115 million barrels of crude oil delivered each month and a new monthly record of 15.4 million barrels set in September.