Saudi Tadawul Group acquires strategic stake in Dubai Mercantile Exchange

DME will be rebranded as the Gulf Mercantile Exchange to reflect its position as the key regional commodities exchange

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Somshankar Bandyopadhyay

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Published: Thu 18 Jan 2024, 10:57 PM

Saudi Tadawul Group Holding Company (STG) has entered into a binding agreement with existing shareholders of DME Holdings Limited to acquire a 32.6% stake in Dubai Mercantile Exchange (DME), one of the leading international commodities exchanges.

As a result, Saudi Tadawul Group will become the joint largest shareholder in DME Holdings Limited alongside CME Group, with other shareholders including the Oman Investment Authority and Dubai Holding as well as global financial and commercial industry leaders. The Agreement also includes an ability for STG to increase its shareholding in the future. The shares acquired represent a mix of new and existing shares, with the proceeds from the new shares used to fund DME’s growth.

STG’s investment represents a significant opportunity to leverage world-class capabilities and expertise, accelerating DME’s growth as a regional commodities leader that is well-positioned to capture global commodities demand. The Agreement will support a strategic move towards leveraging the Middle East’s geographic proximity to both key commodity production hubs and end-markets, with DME serving as a bridge between production and end-markets. The partnership will enable the new Gulf Mercantile Exchange to capture demand for energy, metals, and agricultural commodity markets and support the ongoing global transition to a sustainable economy through the launch of next-generation derivatives contracts as part of the transition to a sustainable economy.

Founded in 2007 and headquartered in the UAE, DME is home to the DME Oman Crude Oil Futures Contract (DME Oman), that generates the world’s largest amount of physically delivered crude oil. The DME Oman contract serves as the third-most important crude oil benchmark globally, which is used by five national oil companies based in the Gulf Cooperation Council countries. DME and the DME Oman contract operate to the highest standards of international financial regulation. Its use is authorized by the Dubai Financial Services Authority (DFSA) and all trades executed on DME are cleared through CME Clearing, which is regulated by the U.S. Commodity Futures Trading Commission (CFTC).

Under the terms of the Agreement, ensuring the integrity of the DME Oman contract has been of particular importance to all parties. As such, it has been agreed that no changes to any aspects of the DME Oman contract will result from the transaction contemplated by the Agreement. In addition, to avoid conflict of interest and safeguard the twin imperatives of neutrality and price discovery, 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 transaction is subject to closing conditions, including as to regulatory approvals. Following the completion of Saudi Tadawul Group’s investment, DME will continue to operate as usual from its headquarters in Dubai International Financial Centre (DIFC) and will remain regulated by the Dubai Financial Services Authority. CME Group will continue to provide its industry-leading CME Globex trading technology and clearing services to Gulf Mercantile Exchange. The CFTC’s role in overseeing CME Clearing’s operations to protect the integrity of transactions executed on the DME and mitigating risk to traders will remain unchanged.

Ahmad Sharaf, Chairman of DME Holdings Limited, said, “On behalf of DME Holdings Limited and its shareholders, I am delighted to welcome Saudi Tadawul Group as joint largest shareholder. In particular, I am proud that Saudi Tadawul Group has chosen to enter the global commodities market through its investment in DME Holdings Limited and this reflects both Dubai Mercantile Exchange’s established position as one of the world’s leading energy-focused commodities exchanges and the opportunities for growth open to Dubai Mercantile Exchange.

“As we enter a new era of growth as the Gulf Mercantile Exchange, we are excited about the potential to build a regional commodities powerhouse with global relevance. Not only will our expanded partnership support our flagship Oman Crude Oil Contract but it will also position us to become a champion for the transition to a more sustainable future.”

Eng. Khalid Al Hussan, Group CEO of Saudi Tadawul Group, said, “Our investment in DME Holdings Limited provides Saudi Tadawul Group with access to one of the most important asset classes globally for the first time, embedding commodities trading into the Middle East’s largest capital markets group. With the option to increase our stake in the future, this investment will contribute to our ability to diversify the Group’s revenues and opportunities and is firmly aligned with our growth strategy and ambitions as part of Vision 2030. We look forward to working together to unlock new growth opportunities, leveraging our proximity to key financial and production hubs to bridge demand from east and west.”

Mulham Al Jarf, Deputy President for Investments, Oman Investment Authority, said, “We are delighted to welcome Saudi Tadawul Group as a new shareholder. Its expertise and insights, along with what we have built over the years with DME Holdings Limited in Dubai Mercantile Exchange, will be invaluable as we continue to navigate through an ever-evolving market landscape. This partnership marks a significant step in our commitment to innovation and excellence in providing opportunities for DME’s regional and global stakeholders while maintaining the integrity of DME Oman.”

Derek Sammann, Senior Managing Director, Global Head of Commodities, Options and International Markets, CME Group, added, “We look forward to welcoming Saudi Tadawul Group as a significant partner in the new Gulf Mercantile Exchange, the premier commodities exchange in the MENA region. Building on DME’s successful benchmark Omani Crude Oil futures contract, Saudi Tadawul Group’s participation in the exchange will unlock new opportunities for developing regionally relevant trading products to help global market participants gain exposure or manage energy, metals or agriculture price risk.”


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