Dubai: The effective transition of the index methodology at Dubai Financial Market (DFM) was completed with the introduction of its new General Index. The developed indices offer a range of market participants world-class investable and tradeable benchmarks for the DFM equity market. The company that calculates the General Index is S&P Dow Jones Indices.
The new General Index provides investors with 10 percent threshold caps, quarterly rebalancing, independent methodology oversight, and index calculation based on the actual free float. Along with the DFM Sharia Index, the transition comprises eight sectoral indices.
In collaboration with S&P Dow Jones Indices as the calculation agent of the new index, #DFM launches new general index providing global best practice for indices and greater transparency for investors. pic.twitter.com/Uh9VU6XCtl— Dubai Financial Market (@DFMalerts) November 21, 2022
To commemorate this achievement, the DFM held a unique bell-ringing ceremony attended by Mr. Hamed Ali, CEO of the DFM and Nasdaq Dubai, Charbel Azzi, Head of Asia Pacific, Middle East, and Africa at S&P DJI, and other organizations.
Before finalizing the methodology, the DFM provided market players with the option to provide feedback on its draft during a consultation period between the 3rd to 17th of October 2022.
Meanwhile, Mr. Charbel Azzi, Head of Asia Pacific, Middle East, Africa at S&P Dow Jones Indices pointed out that, “We are very pleased that DFM has selected S&P Dow Jones Indices as the calculating agent for its indices. Our aim is to offer rules-based and robust index solutions that suit the needs of the local markets and enable market participants to meet their investment objectives.”
The new methodology for DFM indices has the following key components;
- Capping the threshold of a DFM index individual constituent at 10 percent of the index weightage instead of the current 20 percent, thereby limiting the impact of a small number of firms on the index.
- Index calculation based on real market capitalization adjusted for free float.
- Index rebalancing quarterly rather than the present semiannual review.
- A DFM-independent index committee oversees current and upcoming methodology adjustments.
- Alignment of DFM’s sectors with the Global Industry Classification Standard (GICS) that institutional clients track.
- Communication Services, Consumer Staples, Materials, Real Estate, Utilities, Financials, Industrials, and Consumer Discretionary are some new sectors.