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The Dubai Metals and Commodities Centre (DMCC) is set to launch its first product – Dubai Commodities Receipts (DCRs) – which is expected to pave the way for Dubai to become a commodities trading hub in the region.

David Rutledge, executive director of DMCC’s commodities division, claims the legal framework for DCRs is being finalised by an international law firm and a leading Indian software company has completed the IT system, which is being tested.

Eight banks have signed up with DMCC and the centre is in talks with another dozen local and international banks, including HSBC as well as a couple of leading warehousing companies to further strengthen the DCR system.

DMCC, which has been set up to promote commodities trade in the region and transform Dubai into a trading hub, has recently announced plans to create Dubai Tea Trading Centre (DTTC) to boost regional trade in tea.

Rutledge says all soft and agricultural commodities will be allowed to be stored in the warehousing facilities within the DMCC so that DCRs can be issued against these commodities.

“In the future, DMCC has plans to extend the DCR facilities to textiles, steel, chemicals and also to white goods like refrigerators, air-conditioners, etc. This will increase the trading volume in these goods and improve liquidity in the system,” Rutledge says.

The banks that have signed up with DMCC include Standard Chartered, ABN Amro, Citibank, Mashreqbank, Dubai Islamic Bank (DIB), Emirates Bank, Dubai Bank and National Bank of Fujairah (NBF).

Although DCRs will be initially Dubai-focused, the plan is to extend the concept to other emirates and attain a regional appeal.

“However, I don’t want to create an expectation on this at this point of time,” Rutledge adds.

DMCC is also trying to enhance the scope of the system by bringing in another category of members – collateral managers and commodities inspectors, who basically can certify the goods.

“We are already in talks with reputed companies, like SGS collateral management services,” Rutledge says. “These companies should have substantial balance sheets and ample insurance cover. Thus, the financial strength of these companies will add value to the system as a whole.”

Leading warehousing companies, such as Steinweg Warehousing of Netherlands, Henry Bath & Sons Ltd of the UK and Picorini of Italy, have been registered with DMCC to issue DCRs.

DCRs are based on the worldwide concept in which warehousing companies issue an electronic controlled warehouse receipt to traders who hold stocks within the warehouse.

Against these receipts, the trader can raise finance. So far, there are close to a dozen local as well as international banks that have shown interest in working as participating banks.