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REGIONAL E-FX PERSPECTIVE<br />
be an electronic interbank market<br />
in the region, which would act as a<br />
precursor to a fully-fledged electronic<br />
offering.”<br />
However, Almohri notes that the share<br />
of electronic trading is increasing,<br />
a trend he expects to accelerate.<br />
Blackburn echoes this view and<br />
highlights a few changes that have<br />
supported this trend. “Regional banks<br />
across the region have developed<br />
their single dealer offerings to allow<br />
customers to reach their branches,<br />
customers, and the wider community<br />
of multi-dealer platform users,” he says.<br />
“There has been a general consensus<br />
from MENA countries to change their<br />
methods of trading, and central banks<br />
have been key to ensuring that markets<br />
operate with a degree of transparency<br />
around them.”<br />
ISLAMIC FINANCE - VANILLA<br />
BUT IN HIGH DEMAND<br />
Increasing sophistication amongst<br />
MENA investors has affected another<br />
unique aspect of the region’s<br />
markets: Islamic finance. Demand<br />
for Shari’a-compliant products has<br />
steadily increased, with service<br />
providers offering both innovative and<br />
questionable products.<br />
Retail FX is an example of the latter.<br />
Shari’a law prohibits interest and<br />
gambling, both of which are present<br />
in copious amounts in the retail FX<br />
market. While brokers cannot control a<br />
client’s gambling instinct, they have full<br />
control over interest charges, and this<br />
leads to interesting compromises.<br />
Swaps, for instance, are central to<br />
the FX market’s functions, but several<br />
brokers in the region advertise swapfree<br />
accounts. These brokers reframe<br />
the swap as a client fee and execute<br />
the swap on the back end. Is such a<br />
product truly Islamic?<br />
The Qatar Central Bank’s Fintech Strategy 2030 details an ambitious plan to electronify the Kingdom’s financial<br />
infrastructure<br />
of balancing customer demand<br />
with Shari’a needs. So far, MENA<br />
governments haven’t commented on<br />
such tactics. On the institutional side,<br />
greater financial engineering leeway<br />
has resulted in the creation of Shari’acompliant<br />
hedges, swaps, and options.<br />
However, these products remain<br />
relatively vanilla. Bloomberg’s FXGO<br />
platform currently offers the trading of<br />
Islamic deposits and forwards (Wa’ad)<br />
QATAR RAMPS UP FINTECH<br />
STRATEGY 2030<br />
Qatar is a relatively silent presence<br />
in the Gulf region compared to the<br />
behemoth that is KSA and the flashy<br />
UAE, led by the Emirate of Dubai.<br />
However, the Government of Qatar<br />
has made regulatory moves that reflect<br />
the Kingdom’s ambition to be counted<br />
amongst its neighbours.<br />
The Qatar Central Bank’s Fintech<br />
Strategy 2030 details an ambitious plan<br />
to electronify the Kingdom’s financial<br />
infrastructure. While the central bank’s<br />
regulations surrounding loan-based<br />
crowdfunding grabbed headlines, the<br />
body outlined a roadmap to define<br />
regulations for wealth tech, eKYC, DLT<br />
initiatives, open banking, and digital<br />
banking, amongst others.<br />
the Kingdom driving the need for a<br />
sophisticated support system. The plan<br />
seeks to triple the number of registered<br />
fintechs in the country by 2027 and<br />
promote greater financial inclusion.<br />
The move also comes after Fitch<br />
Ratings analysts pointed out the lack of<br />
regulation holding back Qatar’s fintech<br />
sector. As FDI inflows increase in the<br />
region, Qatar is positioning itself as a<br />
viable alternative to Dubai and Riyadh.<br />
WHAT’S IN STORE FOR THE<br />
MENA?<br />
Despite the region experiencing<br />
instability and illiquidity in some<br />
pockets, industry analysts view the<br />
MENA’s prospects favourably. The Gulf<br />
economies’ growth is undoubtedly<br />
positive and is expected to turn that<br />
region into a financial hub.<br />
Dubai is well-positioned as a financial<br />
centre already, and with KSA opening<br />
its economy, analysts expect more firms<br />
to consider Riyadh as a potential hub.<br />
While localisation efforts will reduce<br />
expat FX outflows from the region,<br />
investor sophistication will increase. As<br />
a result, electronic FX workflows and<br />
automation will likely experience steady<br />
adoption.<br />
Other examples such as the approval<br />
for futures products reflect an attitude<br />
This initiative comes in conjunction with<br />
greater foreign investment interest in<br />
In short, the MENA continues to move<br />
forward, despite current turbulence.<br />
NOVEMBER 20<strong>23</strong> e-FOREX 39
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