Due for launch later this year UMEX Liquid™ has been designed purely for the trading of Sharia compliant structured investment products.

It  provide market participants with an order-driven system to trade Sharia compliant structured products and will operate as the focal point for price information and trading of these securities.

UMEX liquid™ is an online institutional trading platform that pioneers a fast, simple and transparent method for the trading of structured investment products.

The platform provides the ability for UMEX clients to search the list of structured investment products and filter them by asset class as well as by geographical region and currency of settlement.

Institutions considering trading on this platform must be members of UMEX.

Growing Product profile :–

In the last 24 months the growth in demand for Structured Islamic Financial products such as Sukuk, Sharia Indices, and Sharia compliant ETFs has increased dramatically. The number is growing exponentially and is currently advancing at a pace of around 50 to 70% per year. By 2020, it is believed that the Islamic structured market place is expected to exceed US $100 billion. The same features that continue to attract investors to structured products have recently garnered the interest of Islamic investors. As the international securities markets begin to show signs of renewed life, issuers will likely position themselves to take advantage of the largely untapped market of Sharia-compliant structured products.

On the whole, a vast array of financial institutions are managing the estimated US $250 billion to US $300 billion of Islamic funds, most of which are held in European private banks and by asset managers. Institutions have not only benefited from more liberal state policies in most Middle East and South East Asian countries; Islamic investment has also allegedly further developed in the wake of socially responsible investment over the past years and a revival of Islamic ideology as applied to investment ethics.

Challenges of liquidity :–

One common risk associated with structured products is a relative lack of liquidity due to the highly customized nature of the investment. Moreover, the full extent of returns from the complex performance features is often not realized until maturity. Because of this, structured products tend to be more of a buy-and-hold investment decision rather than a means of getting in and out of a position with speed and efficiency.

Traditionally a significant innovation to improve liquidity in certain types of structured products comes in the form of exchange-traded notes (ETNs), a product originally introduced by Barclays Bank. These are structured to resemble ETFs, which are fungible instruments traded like regular common stock on a securities exchange.

The future of Islamic structured products :–

This is an interesting time for Islamic investment. Islamic structured products have been hyped for about for a few years but only now are investors starting to acknowledge these new solutions and are actually trading them as part of their investment portfolios. Despite the constraints imposed by the Sharia, creative solutions are being found to enlarge the palette of financial instruments available to investors. “The market grows not just in figures and liquidity but in significant sophistication of the product range," says Christian Kwek, global head of equity derivatives institutional sales at BNP Paribas.

With a lot of new opportunities arising, new entrants are knocking at the door but may find it difficult to put together the appropriate set-up to generate and market Sharia structured products.

Trading efficiency and liquidity :–

UMEX Liquid ™ is an electronic trading environment and provides customers with a more efficient way of disseminating prices for OTC equity derivatives by reducing the administration involved in inter-dealer brokerage.

UMEX Liquid™ is a dynamic, real-time application that enables market participants to post and respond to ‘Indications of Interest’ (IOI) in respect of OTC structured products. It provides total transperancy. The platform is linked to end to end clearing and settlement system.

The UMEX Liquid platform will be available later in 2010.

Further details will be released shortly.