The Dubai Commodities Exchange has launched the first copper futures in the Middle East.
The agreement, sized at five metric tonnes with the price quoted in USD, will go live today, and will be given an approval by the Dubai Commodities Clearing Corporation. Over 600,000 tonnes of copper is consumed on an yearly basis in the Middle East, of which the UAE accounts for more than one-third at 200,000 tonnes.
With quite a bit of construction and infrastructure projects in the fray, there is a strong possibility that the copper demand is going to increase. “The introduction of the new contract is the result of both these favourable market conditions and a high demand from market participants,” pointed out Ahmed bin Sulayem, chairman of the exchange.
He is of the view that the copper futures contract further adds to the opportunities that exists for the investors in the region in diversifying their portfolios away from conventional assets like real estate and equity as futures products allow for financial gains when markets move in either direction. Experts believe that trading in copper futures contracts will also give international investors an opportunity to benefit from the increasing liquidity pool of the Middle East.
Point to be noted here is that DGCX has developed a Copper Advisory Group, an informal body consisting of copper market players that offers the exchange recommendations on the contract design. It will also facilitate vital market feedback. The group, which includes top companies in the copper-consuming industry such as Ducab and Lucky Group, in addition to DGCX members, assist the exchange ensure that it maintains a constant feedback loop with the copper market.
The copper futures contracts will trade from 8:30am to 11:30pm hours Dubai time. The contract is cash settled against the New York futures settlement price for copper to maximise its financial use.
According to the sources, DGCX would be holding workshop to promote awareness regarding the contract and the opportunities it offers to investors.
The exchange has put in place market-making routines to make sure that there is high liquidity and competitive price spreads are provided through each trading day. Another benefit is that the exchange provides clearance of all trades through the Dubai Commodity Clearing Corporation, getting rid of the counterparty credit risk and providing guaranteed settlement to each transaction contract.