Posted on July 06, 2011

Ten months into the running of a new partnership between the Qatar Exchange (QE) and the New York Stock Exchange-Euronext, NSYE officials are reluctant to say whether the joint project is an overall success, arguing that there is still some way to go to get all aspects of the deal up and running.

The centerpiece of the collaboration is QE's participation in the NYSE-Euronext's electronic trading system, known as the Universal Trading Platform (UTP) using the NYSE's Secure Financial Transaction Infrastructure (SFTI) that links Qatari brokers directly to as many as eight major American and European exchanges. Almost immediately after the UTP launched on 9 September last year, the QE stock index soared and volume at one point more than tripled. On the first day using the new trading system, the QE index stood at 7,600. On 11 January, just four months later, it reached a record high of 9,700. It fell back to 7,500 in early March and closed last Thursday June 30 at 8,361. But the Volume also increased from 7,000 shares a day changing hands to a high of 25,000 shares on Jan. 31.

Despite what appears to have been a huge boost to QE's listed shares, Roland Bellegarde, Executive Vice President for European Listing Business and Cash Trading at NYSE Euronext, said it wasn''t possible to say whether the QE-NYSE partnership was responsible. "The success of such a strategic partnership is measured on the mid to long -term and is not visible through index level and volumes which are affected by other actors," Bellegarde said in an interview with Qatar News Agency (QNA). Analysts say that the announcement on 2 December that Qatar would host the 2022 World Cup helped boost confidence in the economy and contributed to the record index highs.

One way to determine the success of the partnership would be to examine how profitable it has been for the NYSE. But since NYSE-Euronext is a privately-held company it does not make public its profit data. Under the deal, the NYSE-Euronext collects 20% of QE's profits. "The partnership allows us to work closely with the State of Qatar on developing that market," Andrew Brandman, Executive Vice President, Chief Administrative Officer of NYSE Euronext told QNA. "We really do believe that in the Middle East there is an absolute opportunity for another center for capital raising." "We see this potentially as an opportunity to introduce our listed companies to raise capital in Doha. The Middle East is a very important marketplace," he continued.

The NYSE-Euronext officials said the State of Qatar was chosen for its first partnership in the region because of its political and economic stability. "It's a single state, there is a lot of wealth, they have a long-term view of how to develop their country and are trying to be a global player politically and on financial markets," Bellegarde said. "They have the ability to grow their markets." Qatari officials initially approached the NYSE-Euronext about purchasing use for trading technology.

The discussions then broadened to include a NYSE-Euronext partnership stake in QE to help bring significant development to the exchange in order for the QE to compete globally, said Bellegarde. While NYSE-Euronext officials called the partnership a work in progress, they pointed out that several milestones have already been reached. "We have accomplished many important milestones in developing the marketplace with Qatar Exchange," Brandman said. "There is more that needs to be done to finish building an internationally integrated cash and derivatives exchange in Doha, but we have no doubt that with the focus of our partners in Qatar the future will be as successful as the last two years have been," he said.

Announced in 2008, the relationship began officially in June 2009 when the NYSE, which merged with the electronic European market Euronext in 2007, purchased a 20% stake worth $200 million in the Doha Securities Market, which was then renamed the Qatar Exchange. It is the largest investment ever made by NYSE Euronext in a foreign exchange. Andre Went, a former managing director of the NYSE Euronext in Amsterdam was named the new chief executive of QE on completion of the deal. There are three NYSE-Euronext members on the QE board.

The partners said in June 2009 that the goal was to run the QE market using NYSE Euronext technology and transform the market structure within two years. Some but not all of this transformation has taken place, now two years later. The QE so far only works with cash stock exchanges. The plan is to extend this trading to corporate and government bonds by the end of the year. Exchange-traded mutual funds and derivatives will be added later, NYSE officials said. A legal framework for the first Qatar derivatives market has already been created and an early version of the derivatives rule book has been sent to the regulator, they added.