Ian Salmon, Head of Enterprise Business Development EMEA for Fidessa reviews the dynamics of trading in the MENA region including DMA access and drivers of future growth.
The Middle East North Africa (MENA) markets appear set to embark on a recovery led by the attraction of investment within and into the region. We’re seeing demand for electronic access to these markets from both our existing western tier 1 customers, who are looking to offer their services in the region, and from local brokerages and banks looking to offer both DMA and retail access to the markets in a way that is safe and reliable. For now, at least, the services required by brokers in this region are order management, the ability to handle FIX flow and straight through processing (STP) with risk and portfolio management.
Two important factors come into play. First, electronic services accessible to market participants from outside the region require reliable communications and the adoption of FIX, together with risk and order management platforms locally to ensure secure and performant access. Obviously, there are a number of networks operating, and they all expect to receive orders via FIX. This is prompting the exchanges and their members to seek reliable pan-MENA communications and complimentary support services. Second, in order to service the needs of the local investment community, which is predominantly retail in nature, competent web-portal and risk capabilities are needed to facilitate pan-regional market access. This forms the backbone of the type of reliable web portals launched by NCB Capital, for example, which can feed into an OMS capable of supporting their 1.2 million retail customers and 250,000 concurrent users.
There are three main models for order flow in the MENA region. First, there is inbound traffic coming from large international firms employing strategies that take account of local trading restrictions. The local brokers are aware of this and are looking to offer FIX-based solutions for inbound order flow as well. The second is intra-regional order flow, where brokers within the Gulf Coast countries utilize their relationships to route orders between themselves and between their memberships. Finally, the third is outbound order flow, which is based on the attraction of ownership of foreign bonds and equities to local players, with local brokers going outside the region to trade these instruments.