The secret of Dubai Gold and Commodities Exchange's success

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No sooner had the press release from the Dubai Gold and Commodities Exchange (DGCX) been issued, with the grand headline boasting ‘DGCX records best ever month in its 14-year history’, than the second milestone fell almost immediately.

For what do you do when your business records its best ever month? You follow that up by recording your best ever day. And then end the sequence with your best ever year.

The region’s leading derivatives exchange recorded volumes of 2.382 million lots valued at over $39.2bn in July, breaking its previous single month trading record of 2.16m set in May 2018.

And last year was a “record year”, according to DGCX chief executive officer, Les Male, who has been in the role for just over 18 months.


Gold has benefitted from turmoil in financial markets, with DGCX’s Gold Futures product underpinning last month’s trading.

He says: “Trading and clearing more than 2.38 million contracts in a single month is a remarkable feat for DGCX, and demonstrates our strong momentum and increasing appeal to investors and traders.

“We traded 22.3 million contracts last year and we’re on track to break that record,” he says.

That this certainty was built on uncertainty sounds like something of a contradiction in terms.

But the success story behind these results, in part, is driven by a rich mix of continued geopolitical tension, with the United Kingdom welcoming a new Prime Minister at a pivotal point of the Brexit process; heightening tensions between the US and UK with Iran; and a trade deal between the US and China appearing as far off as ever.

“Why does that impact a business based in Dubai? It’s because we have global members, and the kind of products we offer are globally attractive as well – hydrocarbons; Brent and WTI, the FX is Euro, dollar, sterling dollar, Indian rupee as well as global benchmarks for gold too,” says Male.


The Indian Rupee Quanto Futures recorded its best month in July since inception in 2005.

“Then, of course, there’s the ongoing local tensions between neighbouring countries.

“All of this creates this uncertainty and in uncertain situations, markets become more volatile. When volatility and uncertainty happen, you get this kind of up and down movement. The volatility in the markets globally will drive more activity on what is effectively a global exchange.”

A prime example of this is the announcement by Indian Prime Minister Narendra Modi on Monday (August 5) that his government was revoking Article 370, which included Article 35A of the Indian constitution, giving some special privileges to the people of Kashmir, and which has been the basis of Kashmir’s complex relationship with India for around 70 years.

This prompted what Male reveals was the exchange’s busiest ever single day on Monday, with over 220,000 contracts at a notional value of $3.85bn.

“Here we are in Dubai and a tweet by President Donald Trump on Thursday night about Chinese sanctions, or a statement from the Indian government on Monday morning, impacts a very successful business based here in the emirates,” says Male.

Gold has finally woken from its slumbers a little bit. If there’s uncertainty, people go to a safe haven and that’s gold. In 2018 the price was high-ish, historically, but it didn’t do an awful lot, it was a bit flat, around the $1,200 per ounce and more recently it’s in the $1,460s. So it’s escalated quite high

“Obviously you put in place an infrastructure that is able to handle shocks – we have over a million orders a day on the screen, we’ve got to make sure that our systems can cope with multiples of that so that any Prime Minister or Presidential announcement, which can cause impact and shock to the market, we can handle.”

The stand-out performing contract in July was the Indian Rupee Quanto Futures, which recorded its best month since inception in 2005, with a total of 1,106,309 contracts traded, up 192 percent year-on-year.

And Male admits the currency is the exchange’s “jewel in the crown”. He explains: “The standout contract for us is the Indian Rupee against the USD. We’re the world’s largest liquidity pool, particularly outside of onshore exchanges in India. We also have a large Indian population in the UAE who are exposed to the movement of the Indian rupee.”

DGCX’s flagship Gold Futures product also underpinned last month’s trading, building on its strong performance in June and trading 61,764 contracts, up 209 percent on last year.

Last month, gold had a 200 percent year-on-year increase, while on Wednesday August 7, Gold futures rallied above $1,500 an ounce, the highest level since 2013, on sustained demand for the traditional haven as the US-China trade war festers, global growth slows and central banks around the world ease monetary policy.


A single tweet by US President Donald Trump about Chinese sanctions could impact DGCX in Dubai.

The move extends this year’s rise to 17 percent, with gains underpinned by inflows into exchange-traded funds. Silver also surged.

Gold has been one of the chief beneficiaries of the turmoil in global financial markets as Washington and Beijing spar over trade. In recent days, the Trump administration threatened fresh tariffs against Chinese goods, the yuan was allowed to sink, and the US branded China as a currency manipulator. The stand-off has boosted the odds of more easing from the Federal Reserve.

Male says: “What strikes me as odd about the gold price move is the lag. The US-China trade wars, the UK and Brexit or the differences between nations, that’s been happening all of last year as well. So why did it really kick off over the last month or two and, to some extent, there’s an element of ‘don’t know’. But I also think the market just had enough of the uncertainty.

“The UK was going to leave Europe in March, then they changed Prime Minister and now it’s October. At some point, a sterling trader, they don’t know what sterling is going to do against the dollar next month, they don’t even know what it’s going to do next week. They turn to gold because they understand that. They can touch it and feel it. There’s supply and demand fundamentals, whereas at the moment, we are held to the vagaries of a Presidential tweet or a Prime Minister’s announcement.”

Currently the exchange, which is based in Dubai’s Jumeirah Lakes Towers, boasts a staff of 48 and is open almost 17 hours a day from Monday through to Friday.

…with Sharia products, we already have a lot of client interest… for Sharia Gold

But Male says that may change in the future. “There’s a strong argument that we may have an exchange for more hours a day. We’re currently open almost 17 hours a day. If the market wants it, and if there’s a certain type of product they want, then we could well open to 23 or 23-and-a-half hours a day.

“Maybe with the Sharia products, as we already have a lot of client interest at the moment, for Sharia Gold. Obviously the Sharia working week is Sunday to Thursday so we could open the exchange on a Sunday,” he says.

Male also talks of expansion into other countries. He says: “There is an argument at one point that maybe we have a satellite office in the UK or Europe, or Singapore for the Asian markets. But right now I would certainly be looking this year, to put in an expanded solution for non-resident Indians. Because it’s a relationship business. One way we are going to build those relationships is by getting out there and meeting clients.

“There are no immediate plans to open up rep offices, but I would like to see much greater footprint from DGCX on the ground around the world, certainly in the next six months.”

At the moment, however, with the US-China trade war continuing, the UK’s Brexit uncertainty zeroed in on the crucial October 31 leave date, Iran, Kashmir, and upcoming US elections in 2020, there is plenty to keep Male and his DGCX busy.

“The trajectory is all going well. I had a very successful first year but it’s like the tricky second album, it’s how to follow that up,” he said.

That second album could well involve more broken records.

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