Qatar and NYSE Euronext yesterday announced a blockbuster deal which will see the latter pick up a 25 percent stake in the Doha Securities Market (DSM) for $250m in cash.
The government will retain a 75 percent holding in the DSM through its investment arm, the Qatar Investment Authority (QIA).
The move is a slap in the face for the London Stock Exchange. London has been negotiating for 18 months a similar contract with Doha and Qatar has taken a 15 percent stake in the LSE
in expectation of an eventual deal.
A minority stake in the DSM is to be sold in the next three years through an Initial Public Offering (IPO). The closing of the transaction is expected to take place in the fourth quarter of this year, subject to completion of documentation work and on obtaining no-objections from regulators involved. NYSE Euronext will receive three of the 11 seats on the DSM board as a result of the deal.
Billed as a ‘strategic partnership’, the move means the DSM is set to be a significant international player in the global exchange space and will provide NYSE Euronext with a presence in the Middle East.
The new relationship means Qatar and NYSE Euronext will be building a new, internationally-integrated cash and derivatives exchange here with direct links to the know-how and technology skills of the world’s largest capital markets.
Derivatives are financial instruments whose value changes in response to changes in underlying variables. Derivatives can fall under the categories of futures, options and forwards.
H E Sheikh Hamad bin Jassem bin Jabor Al Thani, the Prime Minister and Foreign Minister, said: “This represents a hugely significant development for Doha’s financial markets, for the people of Qatar and for the Middle East. We are delighted to partner with NYSE Euronext which has a global reputation for excellence. It’s a significant endorsement of Qatar’s importance in the world’s capital markets and will provide considerable opportunities for our future generations.”
He said: “This partnership lays the foundations for us to build Doha into a world-class financial centre. Our country’s financial markets will be an integral part of a group which links together the world’s major trading centres across the US and Europe and now the Middle East.’’
Sheikh Hamad bin Jassem said: “The announcement represents the cornerstone of Qatar’s vision to bring our entire economic infrastructure up to the highest international standards, thereby laying the best possible foundations for the development of this dynamic nation.’’ The partnership lays the foundation for also ensuring high governance and transparency levels of the ‘new’ DSM to meet best practice standards of international exchanges.
NYSE Euronext will act as a partner managing the operation of the new exchange, including the appointment of the senior management team and will be providing technology services.
Duncan Niederauer, NYSE Euronext CEO, said: “It is a great privilege to align NYSE Euronext with Qatar and Doha’s financial marketplace, whose role is increasingly important in the Gulf region and globally.”
Jean-François Théodore, Euronext Deputy CEO, said: “We share the entrepreneurial vision of Qatar and the DSM. Our leading technology, focus on innovation and proven expertise will contribute greatly to the development of a world-class marketplace. In addition to proving beneficial to the people and business community of the Middle East, Europe and the US, this partnership will serve to strengthen the global capital marketplace.”
A project management team has been put together to finalise the scope and timetable for the launch of the new market, which will include cash equities, derivatives and other commodity-based trading products and will be adopted by the new DSM board.
Under the terms of the agreement, the new venture will adopt NYSE Euronext technology for both cash equities and derivative markets. Trading will be in the riyal, although it is expected that there will be capabilities to list multi-currency instruments.
The immediate focus for both partners will be to install the optimum management team as quickly as possible. Recruitment of the CEO and other senior officials is already underway. NYSE Euronext’s family of exchanges includes the New York Stock Exchange, Euronext, Liffe and NYSE Arca Options.
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