Dubai International Financial Exchange (DIFX) is planning a host of reforms to boost liquidity in a move that could edge it closer to a merger with Dubai Financial Market (DFM).

Speaking at a conference in Dubai, DIFX new chief executive officer Jeffrey Singer said the exchange wanted to allow companies to list their stock in dirhams, extend trading hours, open on Sundays and give broader access to UAE-based brokers.

"Institutional trading on the DIFX has been successful, but retail is an area we are really going to be getting into seriously," the former Nasdaq OMX executive said. "The No. 1 objective in the next four to six months is to create an environment that fosters local and regional trading."    

The measures are still pending regulatory approval from the Dubai Financial Services Authority (DFSA).

The DIFX, where company shares are listed solely in dollars, has said it will also begin derivatives trading as part of its liquidity expansion plans.

"One (exchange) has international standards, one has the liquidity. You can't bring the international standards to DFM because the Emirates Securities and Commodities Authority is involved, but you can take the liquidity from DFM to DIFX," said Husam Hourani, partner at Al-Tamimi & Company Advocates and Legal Associates, which advised on both DIFX and DFM initial public offerings this year.

"You need investors to feel that it is the same and need to have the same brokers buying stocks on both," he added.

Dubai last year agreed to sell 33 per cent of DIFX to Nasdaq OMX after setting up the DIFX in 2005 to encourage local companies to sell shares to the public and for foreign companies to tap growing regional wealth.

Since then 15 companies have listed stock on the exchange, of which five are primary listings.

Bourse Dubai is the holding company for both the DIFX and DFM and its chairman also chairs DFM. "One market, one standard... that is the message DIFX is trying to give," said Hourani.

Brokers have said regional retail investors are nervous about shares listed on the DIFX due to a new trading system, the dollar-denominated exchange and a perceived lack of liquidity.

According to Reuters data, shares in DIFX-listed DP World traded average daily volume of 5.6 million shares in the last 90 days.

In contrast, Emaar Properties, the largest firm by market value on the DFM, is averaging 16.42 million shares over the last 90 days.

"Liquidity is the lifeblood of any exchange and (this is done) by increasing the number of products ... primary and secondary listings are essential and the more brokers you have the more liquidity and efficiency you have," said David King, managing director at HSBC Bank Middle East and former chief executive officer at the Dubai Financial Services Authority.

"The majority of regional exchanges are in local currency and it is more familiar ... dirham trading takes away an additional complication so it is another building bridge in the market." - Reuters