While it remains a separate exchange, Nasdaq Dubai will now route trades through the more active Dubai Financial Market. The consolidation of the two systems took effect at the start of the local business week Sunday.
Nasdaq Dubai has long struggled to attract investors despite its ties to the well-known New York-based bourse.
Officials say the new system will give individual investors better access to its stocks and strengthen the city-state's role as a regional financial center.
“Cooperation between the two exchanges will increase, driving the expansion of Dubai as a center of capital markets dynamism and innovation,” said Essa Kazim, managing director and CEO of the Dubai Financial Market.
The Nasdaq Dubai opened in 2005 as the Dubai International Financial Exchange. It was meant to be an alternative to the DFM, listing its stocks in US dollars rather than UAE dirhams and operating under a separate regulatory framework designed to comply with international standards.
The electronic exchange was a key part of Dubai's efforts to establish itself as a financial bridge between Europe and Asia. It was rebranded under the Nasdaq name in late 2008.
It struggled to generate business, however, with few investors taking interest in it and few stocks listing there so trading remains light. Analysts say that is partly because it is easier for individual investors to trade on the older DFM, which hosts listings for regional banks and other companies that are local household names.
Ghida Obeid, an analyst at Dubai-based Shuaa Capital, said Nasdaq Dubai shares could enjoy a boost in liquidity following the consolidation. But she said it could take months to see any major changes because trading on the DFM generally slows in the summer.
“We have to wait and see until liquidity on the DFM itself picks up,” she said.
The Nasdaq Dubai's most active stock is DP World, the global port operator run by indebted state conglomerate Dubai World. The company has announced plans to seek a secondary stock listing in London because of disappointment with its share performance at home.
It said it supports consolidation efforts by the Dubai exchanges “to increase regional investor access to trading shares ... and improve liquidity.”
The DFM acquired a two-thirds stake of the Nasdaq Dubai in May, in part by buying out the portion of the company owned by New York-based stock exchange operator Nasdaq OMX Group.
Another state-controlled company, Borse Dubai, owns the rest. Nasdaq OMX retains a 1 percent stake in Borse Dubai.
The DFM general index gained 0.4 percent to close at 1,506.27. Other regional markets also rose.
