JEDDAH, 20 February 2003 — Electronic trading has started taking off in Saudi Arabia and elsewhere in the Arab world. The delay of nearly four years since it came into operation in the West is due to the apprehensions among Arab investors about the use of technology, according to a leading Gulf banker.
“Electronic trading has advanced in Europe, North America and the Far East. Thirty-eight percent of trading is done electronically worldwide. It’s now catching up in the Middle East as Arab investors are becoming more knowledgeable and more technologically receptive,” Ghassan E. Kteily, regional head of foreign exchange (FX) at BNP Paribas, told Arab News on Tuesday.
“The reasons to trade online are convenience, transparency, 24-hour global coverage, customization, an automatic dialing process and secure trading. The highest level of security is currently available on the Internet,” he said.
“Any time investors ask for foreign exchange prices through electronic technology, they readily get buying, selling and transferring rates,” he said.
Transaction advisory group specialist Stephane Targui, at a presentation for investors, said what was essential was a multiprovider electronic trading system for financial institutions and banks.
He explained the features and risks involved. “Before carrying out any derivatives transaction, an investor should study the legal, tax, accounting and regulatory aspects of the transactions. Investors should also identify their financial requirements regarding each transaction. The prices of any concluded transactions will depend on market conditions at the time they are carried out,” he added.
Electronic trading can be done for spot and forward FX and currency transactions, currency swaps — an FX and currency derivative which makes available a cash surplus in a second currency for a given period, and non-deliverable forwards, which are financial instruments enabling the counter-value in a convertible currency to be guaranteed at a given date for a principal denominated in a non-convertible or non-transferable currency.
With an estimated average daily volume of $1.5 trillion, the global FX market is now the largest exchange market in the world. Due to higher transparency and efficiency in the electronic market than in the voice market, the FX market is gradually migrating online, the presenter said.
