UAE reviving plans to merge its two main stock exchanges, according to press reports

Reuters has reported that a potential merger between the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX) is now "pending at the highest authorities" in the two emirates.

National press has speculated on a potential merger since 2010. However, authorities disagreed on how to value the two exchanges, and the project was abandoned in the aftermath of the financial crisis, Reuters said.

The news agency quoted an anonymous source as saying that "the entire valuation, structuring of the deal" was "done". "It's not a question of whether they would do it now. It's a question of when," the source told Reuters.

Neither the stock exchanges nor the relevant authorities have confirmed that the merger will go ahead. However, the chief executive of the UAE's equities market regulator told Gulf Business that a merger would have "many advantages" for the country's financial sector.

"There are technical, administrative and logistics preparations to be made first before the merger is completed and we are ready for whatever decision that would be made in this regard," said Abdulla al-Turifi, head of the UAE's Securities and Commodities Authority. "We hope this will be made very soon."

"Although any such merger remains a mere possibility, the idea of a union will be welcomed by the international advisory community, which has long been keen to see a consolidation of the two bourses," said UAE-based corporate law expert Alan Wood of Pinsent Masons, the law firm behind Out-Law.com.

"Any merger would increase the number of market participants and the impact on the combined volumes and liquidity would also elevate the status of that market beyond the sum of its two parts," he said.

DFM is 80% owned by Borse Dubai, a holding company which also owns stakes in the NASDAQ Dubai international exchange and the London Stock Exchange. ADX is wholly owned by the Abu Dhabi government. There are no common listings on the exchanges, according to Reuters.

Earlier this month Morgan Stanley Capital International (MSCI) upgraded the UAE's capital markets from 'Frontier' to 'Emerging Market' status on its global equity index. Most fund managers benchmark their performance against MSCI's rankings, which are calculated by reference to size and liquidity.