This year, at least three Internet companies have opened offices in Dubai, trying to capitalize on growth opportunities in the region. Case in point: The retail Internet platform of Deutsche Bank, dbFX.com, recorded a 501% year-on-year increase in Middle Eastern currency trading volumes in the first quarter of 2009.
"The opportunities are ripe for foreign-exchange firms, because businesses in Dubai are already very aware and sensitive to foreign-exchange fluctuations," said Kathy Lien, chief strategist at Global Forex Trading, which opened a Dubai office last year.
Oanda Corp., with headquarters in New York, is the latest currency platform to open shop in Dubai, following Saxo Bank and FXCM Holdings LLC earlier this year.
Large institutions have already been working in the region. Deutsche Bank began offering currencies as an asset class to Middle East clients in 2005.
"The people there use forex all the time. They're very international - international payments; they need to hedge their currency exposure, and there are always people who speculate," said Michael Stumm, president and chief executive of Oanda, an Internet-based foreign-exchange trading and currency information service for individuals and large corporations.
However, Oanda has few offices, with the majority of staff working in its technology team. Its Dubai office, therefore, says a lot about the importance of the region, particularly as business there is largely driven by money management rather than individual traders.
"We tend to have more people ask us if we have managed fund products," said Lien of Global Forex Trading. Alternatively, big money managers or banks may be looking for new systems to use for their trading operations.
This is very different than the core business model for most of the online foreign-exchange brokers operating in the U.S., Europe and Asia.
"There's a very big shift in strategy for companies that have offices in Dubai," said Lien.
Stumm said he hopes to increase liquidity and bring down the cost of trading in currency markets in the Middle East with Oanda's foray into Dubai.
"A number of companies have been opening there," said Stumm. "Our plan is to shake up the market."
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