The Dubai Mercantile Exchange (DME) said today that it will offer a 20 per cent equity stake in the exchange to a group of six prominent investment and energy trading firms in an attempt to increase interest among international investors to boost its liquidity. The DME is the home of the most prominent contract for Middle Eastern sour crude, which it hopes will be a measure for world crude prices, but it has struggled with relatively low levels of liquidity. DME officials hope the entrance of several major institutions, including Goldman Sachs and Morgan Stanley, will raise the exchange's international profile. The firms involved also include Vitol, Concord Energy, Casa Energy Trading and a division of Shell. Ahmad Sharaf, the DME chairman, said: "The deal gives us access to some of the best minds in the world in the commodities sector as we try to find a balance between financial traders and physical traders." The DME's flagship crude oil contract has grown in prominence in the year since it launched, but the exchange has been criticised for its volatility, which traders ascribe to a low level of liquidity and dominance by a few major traders. At one point last month, the contract closed higher than the West Texas Intermediate contract, even though Oman crude oil is of lower quality and nearly always priced at a discount. Mr Sharaf declined today to comment further on the structure of the equity stake, including the size of the holding that each company would take. He rejected a suggestion that the new investors would be required to trade a set number of contracts to raise the exchange's liquidity. "As an exchange we cannot force any sort of liquidity," he said. Mr Sharaf also declined to say which division of Shell was involved, and took pains to note that the DME board authorised the dilution of up 20 per cent of equity, which did not necessarily mean that the companies had taken the full 20 per cent stake. Mr Sharaf said the exchange wanted to grow its volumes and the number of products it offered. He said the DME had already succeeded in creating "a third global benchmark" for the trade of crude. "We have created a highly regulated and transparent futures exchange designed to maintain market integrity and transparency," he said. Thomas Leaver, the DME chief operating officer, stressed Asia was the key growth market for the exchange, since 64 per cent of middle-eastern crude gets shipped to markets in the region, and the exchange would look to raise its profile there. "Our international outlook and visibility has really set us apart," he said. "As the effects of decoupling become apparent, international interest in the region is growing." But Mr Sharaf indicated that the DME had no plans to sell equity stakes to Asian firms. "There's nothing indicating an equity stake with any company in that region at the moment," he said. The DME is a joint venture by Tatweer, New York Mercantile Exchange (Nymex) and the Oman Investment Fund. After today's announcement, the three owners each have 25 per cent stakes in the DME, with the remaining five per cent held by exchange members.
