The Gulf region is set to gain another financial exchange after Financial Technologies, an Indian trading technology company, announced its plans on Wednesday, to set up an operation in Bahrain next year.
The exchange, which is to be called Bahrain Financial Exchange, will offer conventional and Sharia-compliant financial instruments and will face fierce competition from the region's existing bourses which are in some cases backed by cash-rich governments.
Abu Dhabi, Qatar and Dubai are all championing their own exchanges, while Bahrain is the smallest stock market in the region apart from that of Oman.
Financial Technologies, which is listed in Mumbai, said the BFX would list cash, derivatives, currencies, commodities, equities and debt. The bourse would also list Islamic finance instruments such as sukuk, or Islamic bonds.
The Indian company already has investments in the Gulf, including the Dubai Gold and Commodity Exchange, launched last year.
Craig Hewett, Financial Technologies' regional business officer, said: "We know there are a few other exchanges in the region, but it doesn't mean there can't be another one. Our multi-asset platform is our outstanding differentiator... (and) clients want a liquid secondary market, which we can provide."
The plan comes amid a challenging time for stock markets.
The MSCI Arabian Markets Index has shed nearly two thirds of its market capitalisation in the past 12 months as plummeting oil prices and the credit crunch spell the end of five years of growth in the region.
Arshad Khan, Financial Technologies' head of Middle East and North Africa, conceded that the region's exchanges had suffered.
However, he added: "We believe we are bringing in innovation that will help bring investors back. We are the only exchange that can list multiple types of securities, and have done our research, so we know there is demand for this."
Western technology providers are increasingly offering connections from Gulf-based brokerages to the world's exchanges, and from the global trading community to the Gulf's exchanges.
This week, Citigroup's Global Transaction Services business said it would provide direct custody and clearing services to traders active on the Abu Dhabi Securities Exchange, Dubai Financial Markets and Nasdaq Dubai.
The plans for the new exchange have been approved by the Bahrain Economic Development Board, a powerful body chaired by the island's crown prince.
Financial Technologies is a relative newcomer to the exchange and trading business, but has grown rapidly since it was founded in 1988.
Copyright The Financial Times Limited 2009