The Abu Dhabi Securities Exchange (ADX) announced that it is reducing overall trading activity fees on all exchange transactions as part of its “ADX One” strategy to double the market capitalization of companies listed on the exchange in the next three years.
The new pricing structure will be the second time the exchange has reduced its charges in the past two years to enhance market liquidity further. Trading commission on ADX was reduced in June 2019 as part of Abu Dhabi’s Ghadan 2021 plan of lowering the cost of doing business in the Emirate. Under the new initiative, fees of all transactions that occur on ADX are to be reduced by more than 22% to 0.175% from 0.225%, effective February 14.
As part of the new fee structure, ADX has created an incentive plan, applied on an annual basis, for brokerage firms who generate AED 20 million worth of trading commission. Firms that fulfill the annual incentive requirement will be exempt from paying any trading commission to ADX for the year in which the threshold is met. The new initiative favors investors seeking to broaden and diversify their investment portfolios without incurring high transaction costs.
The reduction in transaction fees is expected to increase overall market depth by decreasing the bid-ask spread on the exchange, an effective way to measure market liquidity. Furthermore, the new initiative comes amid ADX efforts to attract more investors by offering more high-quality services and products.
The market capitalization of stocks listed on ADX surpassed AED 750 billion for the first time in 2020, a 39.7% increase from AED533 billion in 2019, and has reached AED 805 billion by the end of January this year. Meanwhile, the value of securities traded on ADX increased by 28% to AED72.8 billion in 2020 from AED56.8 billion in 2019. The number of foreign investors on ADX increased by 38% in 2020 while the value of shares they traded rose by 6.5% to AED 62.6 billion, whereas institutions trading value rose 35.6% to AED 111.1 billion last year.
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