Bahrain Financial Exchange: Reversing Trends in Bahrain’s Financial Sector

 

30 June 2010
Source : Bahrain Financial Exchange

For decades, the Kingdom of Bahrain enjoyed the status of being the region’s leading financial center. While it is still seen as a benchmark for sound financial regulation in the Middle East, increased competition from rivals such as Dubai and Qatar has steadily eaten away at the Kingdom’s market domination.

If New York, London, Tokyo and Mumbai are anything to go by, then the recently-established Bahrain Financial Exchange (BFX), the first Multi-Asset Exchange in the Middle East and North Africa, could reverse this trend and become a driver in rebuilding Bahrain’s position as the leading financial centre in the Middle East. The BFX’s unique value proposition is simple; it provides an internationally-accessible and secure trading environment in an open well-regulated market offering a multi-asset class trading, a first for the region.

Through this environment, which includes conventional finance as well as the region’s first Islamic finance exchange, the BFX is expected to play a critical role in restoring the Kingdom as a regional financial powerhouse.

The need to establish a multi-asset exchange was first identified by Financial Technologies Group, the BFX’s parent company, after a lengthy feasibility and planning exercise. This work identified a variety of gaps that the GCC’s current financial market landscape suffers from, including fragmentation of liquidity along national lines, “long-only” equity markets, a lack of secondary trading, regional pricing benchmarks and liquid alternatives for local commodity trading, and minimal facilities for hedging and risk management.

The BFX multi-asset, multi-access platform addresses this Middle East market gap by providing its services to the market while giving them access to risk management solutions, opportunities to raise capital and to invest, all under the governance of the Central of Bank of Bahrain. The platform will allow members to trade in cash instruments, derivatives, structured products and shariah-compliant financial instruments.

It is expected that the Exchange will create a step change in the Middle East financial markets as its multi layered offering will move the region away from just being a distribution centre. For years, Middle East countries have historically witnessed significant capital outflow on account of a lack of investable assets. The BFX will stem this outflow and direct the liquidity back to Bahrain by listing foreign asset classes (equity, fixed income, currencies and commodities) on its market. This will provide Middle East investors - both Institutional and retail - with access to low-cost robust exchange traded foreign investment alternatives, creating foreign investment inflows into Bahrain. It should also lead to a significant fund-flow from both institutional and retail customers, across the whole region.

The BFX network is supported by its parent company’s, (FT Group), own exchange network, which is one of the world’s largest networks, currently comprised of 10 exchanges that connect fast-growing economies of Africa, Middle East, India and South East Asia.

The BFX network is supported by its parent company’s, (FT Group), own exchange network, which is one of the world’s largest networks, currently comprised of 10 exchanges that connect fast-growing economies of Africa, Middle East, India and South East Asia.

About BFX

Bahrain Financial Exchange (BFX) is a pioneering cross border and multi product exchange in the Middle East and North Africa, and will be internationally accessible, to trade cash instruments, derivatives, structured products and shariah-compliant financial instruments. The BFX is regulated by the Central Bank of Bahrain (CBB) and has an in-principal approval. The BFX is a wholly owned initiative of Financial Technologies Group (FT Group), which currently owns one of the world’s largest networks of 10 exchanges connecting fast-growing economies of Africa, Middle East, India and South East Asia.

The BFX has set up its Clearing and Depository Corporation (BCDC) to clear and settle the contracts it trades. The BFX Training Institute is an international standard in – house training facility, providing world class conventional and Islamic financial training and education courses. The BFX is a member of the Futures and Options Association (FOA), the International Islamic Financial Market (IIFM), the Accounting and Auditing Organization for Islamic Financial Institution (AAOIFI), and a member of the Associations of Futures Markets (AFM).