Stock Exchange Industry in UAE: An Assessment of Potential Merger between Dubai Financial Market and Abu Dhabi Securities Exchange

Purpose – The purpose of this paper is to give an overview of UAE Stock Exchange industry. In particular this paper aims to assess a potential merger between Dubai Financial Markets-Nasdaq- Dubai and Abu Dhabi Securities Exchange, evaluating risks, rewards, policy and business implications. Design/methodology/approach – The paper presents a theoretical framework and a literature review of M&As in financial sector. It then carries out a case study on a potential merger between the UAE Stock Exchanges and a discussion on the implications for the actors involved. Findings – The contraction both in market capitalization and in trading value in the three UAE Stock Exchanges caused by subprime financial crisis and market fragmentation could be a key factors in implementing a merger between them. Because of high-fixed costs and trading platform, a single consolidated stock exchange may benefit from significant economies of scale, particularly network effects, and economies of scope. Practical implications – This paper could be useful to Security and Commodity Authority, in order to support a merger between Dubai and Abu Dhabi Stock Exchange. Given that UAE capital market regulator has tried to improve efficiency in UAE stock market over the last years, a merger between UAE Stock Exchanges could have positive effects on overall efficiency. Originality/value – It is the first paper that analyze UAE Stock Exchange industry. It is the first study that focusses on a potential merger between emerging markets’ stock exchanges. It is one of the first contributions that relates stock exchanges belonging to emerging and developed countries.