As GCC Countries Move Away From Oil, the FX Industry Grows

Over the previous decade, the overseas change (foreign exchange) business has been choosing up pace when it comes to improvement and recognition in Arab international locations. This is obvious, specifically, within the Cooperation Council for the Arab States of the Gulf, beforehand often known as the Gulf Cooperation Council (GCC). 

The GCC is a regional intergovernmental political and financial union. It is made up of all Arab states of the Persian Gulf, aside from Iraq. Specifically, these international locations are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE).

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The international locations throughout the GCC have enormous oil fortunes, nonetheless, their strategy to foreign currency trading and the maturity of the business varies. In common, foreign exchange doesn’t have widespread recognition as an asset class, because the monetary markets are nonetheless largely centered on conventional belongings. Even derivatives, equivalent to choices and futures, are within the early phases.

However, as Finance Magnates beforehand analyzed, the Middle East and extra particularly, the GCC area, is at a turning level. This is as a result of the international locations inside this area are desirous to diversify their economies away from oil, leading to an uptick in retail buying and selling.

GCC Countries ranked by GDP ppp

In phrases of GDP per capita, when adjusted by buying energy parity, Qatar ranks the very best out of all GCC international locations. However, when it comes to GDP, the 2 international locations which dominate the area are Saudi Arabia and the UAE, which even have the 2 most mature FX industries. These two markets, that are rising at a gradual fee, give a glimpse into the way forward for the area and the way it’s evolving.

History of FX within the GCC Region

In this area, the FX business was first launched within the 1990s, kicking off first in Kuwait, earlier than spreading to different GCC international locations. However, regulation was gradual to observe.

In 2008, following the worldwide disaster, monetary regulators throughout the area began to implement stricter rules and commenced to crack down on unregulated entities.

Now, notably in international locations such because the UAE, the place the central financial institution and the Dubai International Financial Centre (DIFC) have taken on a bigger function in imposing strict worldwide guidelines, the FX market is on its technique to reaching the identical degree of maturity of that seen in Europe.

Dubai is Quickly Becoming an FX Hub

Dubai is shortly changing into a worldwide regulatory hub for the business. In latest years, large foreign exchange brokers have established themselves in Dubai. In addition, branches or consultant workplaces of European and UK brokers have began showing in higher numbers within the metropolis, equivalent to FXCM, Saxobank, Roboforex, Avatrade, ATFX, Hot Forex (HF Markets), amongst others.

Because there are native and worldwide brokerages positioned within the area, particularly in Dubai, traders have a good quantity of buying and selling suppliers to select from when buying and selling FX.

However, though the UAE and Saudi Arabia do have the 2 largest FX markets, the remaining international locations shouldn’t be discounted.

Mohammad Isbeer of EquitiMohammad Isbeer, the Global Head of Brokerage Sales at Equiti

As Mohammad Isbeer, the Global Head of Brokerage Sales at Equiti, outlined: “Kuwait is a vital marketplace for FX; the business there’s mature and demand for FX by Kuwaitis is strong. Oman is an enormous untapped market, however the lack of related regulation is an impediment in the way in which of a number of brokers who tried to penetrate the market over there.”

Isbeer will likely be on the Gold and Glitter: Understanding Today’s Middle East Markets panel on the upcoming iFX Expo in Cyprus, which will likely be held in May. On the panel, members will focus on the present alternatives, distinctive regional elements, and potential within the Middle East and North Africa (MENA) area.

FX Trading Trends within the GCC Region

The greatest query that must be requested is that if there’s demand for the asset class within the area? Taking a have a look at the typical deposits made by traders in October and November of 2018 when buying and selling foreign exchange, you may get a glimpse into the scale of buying and selling throughout the area.

Average FX deposits in GCC Countries

Marcelo Spina, Global Head of Partnerships at FXTM informed Finance Magnates that demand within the area is steadily rising: “The GCC is progressively changing into an influential participant in international monetary markets, and we’ve got seen an equally elevated urge for food in the direction of wanting to know and study extra in regards to the FX markets.

Marcelo Spina of FXTMMarcelo Spina, Global Head of Partnerships at FXTM

“While the United Arab Emirates has steadily made progress in the direction of changing into the monetary hub of the area, curiosity in buying and selling and investments has additionally picked up in reputation throughout the GCC. We do anticipate that this development of recognition will proceed to extend.”

For FX buying and selling, main foreign money pairs are the popular alternative, with a specific concentrate on the EUR/USD pair. However, GBP/USD, USD/JPY and GBP/JPY additionally appeal to a number of consideration from traders within the area. Spot FX buying and selling can also be widespread throughout the area, in addition to gold and oil.

Ali Hassan of Q8 TradeAli Hassan, Vice President of Business Development at Q8 Trade

Speaking to Finance Magnates about buying and selling traits, Ali Hassan, the Vice President of Business Development at Q8 Trade, a dealer primarily based in Kuwait, highlighted: “The majority of particular person members within the area are centered on fast-pace buying and selling greater than long-term buying and selling. They are extra centered on the adrenaline rush they get from such commerce.”

Is the Future of FX Bright in GCC Countries?

Although in some GCC international locations, the FX business remains to be within the early phases of improvement, the expansion of the sector is choosing up pace. A extra uniform strategy to regulation, elevated liquidity, and growing economies are all contributors to the expansion of this business.

“The FX market will proceed its gradual development as we transfer ahead into 2020 and past. Institutions have historically held an involvement within the FX market, however with international traits and different developments impacting monetary markets day-after-day, folks will naturally be increasingly attuned to how FX charges can have an effect on their every day lives,” Spina famous. He additionally highlighted the significance of teaching your self on FX earlier than investing.

“The GCC was, and can proceed to be, one of the vital engaging areas for FX; it isn’t far behind what is occurring in Europe and Australia. The potential for FX within the area was considerably hindered by the scams that touched the business and gave it a foul status within the final 20 years,” outlined Isbeer.

“The current, and evolving, regulation we’re seeing now throughout the area is remedying that as shoppers develop into higher knowledgeable in regards to the business and the significance of regulation. I see a wholesome development in the direction of taking our business to the following degree within the promising GCC market,” he concluded.

Becoming regulated in GCC international locations

With the FX market rising, how simple is it for a dealer to develop into regulated? That reply relies on which nation you need to function in, however usually, the reply is that it may be difficult as a result of the area remains to be growing a complete understanding of what FX platform suppliers provide to their shoppers.

The UAE, which has probably the most developed FX business out of GCC international locations, additionally has probably the most streamlined regulatory course of for firms making an attempt to determine themselves inside this house. Brokerages can apply for a license with the Dubai Financial Services Authority (DFSA). However, acquiring a license can take from six months as much as a yr.

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David is the founder of The firm originates business financing for companies of all size in the Canadian marketplace . Originations include business loans, term loans, asset based lines of credit, SR ED Tax credit financing , and receivable financing .

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