The Abu Dhabi Securities Exchange (ADX), the second largest bourse in terms of market value, and FTSE Russell have partnered to develop the FADX 15 (FTSE ADX 15 Index) futures contracts trading on its derivatives platform on Tuesday.
The index will be the benchmark blue chip measure that will support ADX’s derivatives market and the creation of ETFs and other index-tracking investment vehicles.
The FADX 15, the benchmark index will include the largest and most liquid 15 companies on the ADX, carefully selected using a combination of free float adjusted market capitalization and median daily trading value.
The creation of the FADX 15 is the first in a suite of co-branded indices being developed by ADX and FTSE Russell and closely follows the announcement of the new FTSE ADX sector indices that leverage the Industry Classification Benchmark (ICB), a global industry classification standard.
ADX’s partnership with FTSE Russell is the first of its kind in the region. As part of the exchange’s ambitious strategy launched last year to attract more international investors and enhance liquidity, ADX has broadened its asset class offerings, including the introduction of single stock futures in the fourth quarter of 2021.
First Index Derivatives
The futures, based on the FADX 15 Index, are the first index derivatives to be listed on the ADX as part of its efforts to boost market liquidity and attract more global investors.
The FADX 15 futures are cash-settled contracts that will replicate the price performance of the benchmark FADX 15 Index, which comprises the most liquid and the largest 15 companies listed on the ADX main market.
The move will provide a new way for investors to trade equities listed on ADX’s main market, facilitating risk management for portfolio investors during periods of market volatility, ADX said in a statement.
“The launch of FADX 15 Index futures will increase opportunities for investors and traders to gain two-way market exposure while enhancing their hedging and leveraging capabilities,” Saeed Al Dhaheri, ADX’s managing director and chief executive, said.
The roll out of a wider array of products on our derivatives market continues to reflect our commitment to meet the evolving needs of sophisticated market participants and attract global institutional investors.
“We look forward to deepening our partnership with FTSE Russell to create more indices that will support the ADX One strategy of enhancing market liquidity and providing unique growth opportunities,” Al Dhaheri said.
Selection of Companies
It selects companies by free float adjusted market capitalisation and median trading value.
FTSE Russell, wholly owned by London Stock Exchange, is a global provider of benchmarks, analytics and data solutions with multi-asset capabilities.
The FADX 15 Index futures contract will facilitate market access for international investors and enhance transparency, governance and efficiency for the UAE capital markets, Arne Staal, chief executive of FTSE Russell, said.
“Our collaboration with ADX confirms FTSE Russell’s commitment in enabling Middle Eastern financial markets to innovate and meet the growing demand for open access to data, pricing and performance metrics … we look forward to announcing a range of new benchmarks in the coming months,” Staal said.
ADX launched its derivatives market in November, when trading in the single equity futures of Etisalat, First Abu Dhabi Bank, International Holding Company, Adnoc Distribution and Aldar Properties started.
The value of trades on the derivatives market surged by more than 950% from beginning of the year to end of May, the ADX added.