Gulf Mercantile Exchange Established After Saudi Tadawul Group Acquires Stakes in Dubai Mercantile Exchange
By Abhishek Dey
Saudi Tadawul Group (STG) has signed a binding agreement with existing shareholders of DME Holdings Limited to acquire a 32.6 percent stake in Dubai Mercantile Exchange (DME), one of the leading international commodities exchanges. Since the agreement provides STG with the option to increase its shareholding in the future, DME is undergoing a renaming process and will be known as the Gulf Mercantile Exchange.
Key stakeholders in DME
Founded in June 2007, DME serves as the region’s first international energy futures and commodities exchange. It originally emerged as a joint venture involving the Chicago Mercantile Exchange Group (CME), the Oman Investment Authority, and Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum’s global investment holding company, Dubai Holding. In addition to its core shareholders, global financial institutions, and energy trading firms like Goldman Sachs, J.P. Morgan, Morgan Stanley, Shell, Vitol, and Sebrina Holdings also hold equity stakes in DME.
The transaction with DME valued at 107 million Saudi Riyal (US$28.5 million) will see both the Tadawul Group and CME become equal shareholders at 32.6 percent each. Other stakeholders to the STG-DME agreement include the Oman Investment Authority and Dubai Holding, being core shareholders in DME.
In an official statement, STG announced that the Dubai Mercantile Exchange will continue its operations from its headquarters in the Dubai International Financial Centre and will remain under the regulation of the DFSA. To prevent any conflict of interest, it has been declared that no Saudi Arabian crude oil contract will be traded, sold, or bought on, or indexed to, nor will Saudi crude be delivered against, the DME Oman contract via DME.
- The Dubai Mercantile Exchange is home to the DME Oman Crude Oil Futures Contract (DME Oman), which currently generates the world’s largest amount of physically delivered crude oil. Five national oil companies from the Gulf Cooperation Council (GCC) countries currently utilize the DME Oman contract, making it the world’s third most significant crude oil benchmark. Both the DME and the DME Oman contract are subject to the strictest international financial regulations.
- CME Clearing, which is regulated by the United States Commodity Futures Trading Commission (U.S. CFTC), processes all trades executed on the DME. Furthermore, the Dubai Financial Services Authority (DFSA) also approves the usage of DME.
About the Saudi Tadawul group
A Riyadh-based holding company, STG was founded in 2021 and comprises four integrated subsidiaries: Edaa (Securities Depository Centre Company), Muqassa (Securities Clearing Centre Company), Wamid (an innovative technology services business), and the Saudi Exchange. It ranks among the top 10 global stock exchanges by market capitalization.
The STG group was established as part of an ongoing developmental initiative aimed at improving the Saudi capital market, attracting international investments, and diversifying the Saudi economy.
Aligned with Saudi Vision 2030, the STG group actively supports the Financial Sector Development Program, which is designed to enhance Saudi Arabia’s appeal as a global investment hub and entry point to the Middle East and North Africa (MENA) region. Key goals of the Saudi financial sector development program include:
- Double the size of the financial sector.
- Align the financial market’s size with that of the banking sector.
- Establish an inclusive system benefitting the majority of Saudi citizens.
- Digitize processes to enhance customer experience and operational efficiency.
- Ensure sector management by national professionals.
- Attain one of the top 10 positions in financial stability among G20 countries.
The STG group has undertaken other efforts as well, such as signing a Memorandum of Understanding (MOU) in December 2023 with China’s Shenzhen Stock Exchange (SZSE) to strengthen cooperation and explore opportunities in joint listing and financial technology. The STG-SZSE partnership focuses on promoting the development of the Saudi capital market, with shared objectives of fostering capital market growth for issuers and investors from both nations.
This development came at the heels of a similar MOU, signed between the STG and the Shanghai Stock Exchange (SSE) in September 2023. Under the STG-SSE MoU, both sides will explore opportunities in cross-listing, fintech, ESG, data exchange, and research, as well as promote diversity and inclusion in both markets. Emphasis will also be laid on knowledge sharing in listing businesses, dual listings of ETFs, and investor relations initiatives, while developing the infrastructure of both capital markets