How economic diversification is fuelling MENA’s e-FX revolution

The Middle East has historically offered massive growth opportunities interspersed with periods of significant instability. Given the region’s vast geography, identifying common trends across each economy is a challenging task.

However, FX services have witnessed steady growth in the region, thanks to the region’s desire to shift away from oil and rising economic opportunity. Mohammad Isbeer, Chief Institutional Officer, Equiti Group, lists a few factors when asked about the region, specifically the Gulf Cooperation Council (GCC) countries’ growth.

“The region is booming because of strong economies, government support for financial markets, and growing investor demand for new asset classes like gold, crypto, and FX,” he says. “With a young, tech-savvy population and a rise in institutional players, the Middle East is now a key destination for global capital.”

Regulation has been a key driver of this boom, giving birth to new economic opportunities and investor interest. Here’s how these factors are coming together to make the Middle East an FX hotspot.

Economic strength and regulatory evolution

The Middle East’s emergence as a currency trading powerhouse is built on several interconnected economic foundations that extend well beyond oil wealth.

The region benefits from a unique combination of geographic advantages and financial stability. Situated at the crossroads of Asia, Europe, and Africa, Middle Eastern financial centers access overlapping trading hours across global markets, making them natural hubs for currency trading.

This strategic position, paired with strong sovereign balance sheets and actively deployed capital from sovereign wealth funds, has created robust demand for sophisticated FX solutions.

According to Brian Barrett, Managing Director, Head of eTrading, Global Markets, First Abu Dhabi Bank, stable economies, large expatriate populations, and forward-thinking policies like Golden Visas have all played important roles. Barrett emphasizes that the “vision to diversify and invest in non-oil sectors of the economy is the overriding factor in recent years,” with Abu Dhabi’s reputation as the “Capital of Capital” providing access to significant investment resources.

This economic diversification strategy has fundamentally changed the region’s relationship with currency markets. By reducing dependency on oil, which is predominantly traded in USD, GCC economies have naturally increased flows in other currencies.

As Barrett explains, “The growth in non-oil sectors such as finance, tech, and tourism has been outpacing oil-based growth over the past few years,” creating more diverse currency needs. Infrastructure developments like the UAE’s 5.6GW Barakah nuclear power plant, which now provides 25% of the country’s electricity, exemplify this commitment to diversification.

The UAE and Saudi Arabia have been particularly aggressive in this transformation, investing heavily in non-oil sectors including tourism, real estate, fintech, and capital markets. These initiatives have not only attracted international capital but also fostered cross-border business flows that drive demand for currency trading and hedging.

As Paul Hopkinson, FXGO Product Manager at Bloomberg notes, this has led to “a marked increase in FX trading volumes, the number of participants, and the use of electronic platforms to manage risk.”

Regulatory reforms have been equally instrumental in attracting global investors to the region’s FX markets. The UAE’s Federal Decree-Law No. 26 of 2020, which allowed up to 100% foreign ownership in most sectors, has been particularly transformative.

Barrett describes it as “pivotal in not only accelerating FDI but also increasing competitiveness and enhanced economic diversification,” with many new entrants in finance and tech bringing sophisticated demands for FX products.

The regulatory evolution extends beyond traditional finance into emerging asset classes. Isbeer highlights that “interest in crypto is also rising fast, with both retail and institutional investors looking for regulated ways to trade digital assets.” This trend is supported by new crypto trading licenses issued in Dubai, Abu Dhabi, and Bahrain, positioning the region as “a major hub for blockchain innovation and investment” alongside its growing traditional FX market.

These combined economic and regulatory factors have created a self-reinforcing cycle of growth in Middle Eastern FX markets, where diversification creates new currency needs, which attracts more participants, leading to further market development and sophistication.

Strategic advantages: Geography, investors, and Islamic Finance

While electronic trading is growing rapidly, the transition from traditional methods varies across the region. “In the MENA FX markets, both voice and electronic trading continue to play important roles, each serving different types of transactions,” observes Anna Senina, Market Development manager at LSEG. “Electronic trading has seen significant adoption in more developed markets like the UAE, Qatar, Kuwait, and Saudi Arabia, where digital transformation is advancing steadily. However, the pace of adoption varies across the region, with some markets still in the early stages of electronification.” 

She notes that “voice trading continues to be relevant—especially for large, complex, or customized transactions that require negotiation and a more bespoke approach,” though “as infrastructure improves and credit dynamics evolve, the shift toward electronic trading is expected to continue.”

“The MENA region’s location offers a unique advantage: it sits at the intersection of global time zones. With partial overlap across Asia-Pacific, Europe, and the early hours of North America, the region allows for continuous market engagement and timely access to global liquidity,” explains Hopkinson.

This offers the region a range of practical benefits, as Barrett elaborates. “Straddling European and Asian trading hours has the advantage of being able to tap into the deep liquidity of both regions. A notable example of this is the improvement in GBP liquidity pre-London open or the increase in CNH flows.”

This geographic advantage has been combined with infrastructure development to transform the UAE into a financial center. “Our airports are major hubs, Jebel Ali is one of the world’s largest ports, and so it’s a logical next step for the UAE to become one of the primary financial hubs,” Barrett continues. “The rapid expansion of ADGM, DIFC and the significant influx of hedge funds over the past 12-18 months is testament to this.”

Private investor participation in FX markets has also surged across the Middle East, creating a more diverse trading ecosystem, Hopkinson explains. “Private investor awareness in FX has grown rapidly, driven by greater digital access and an increasingly sophisticated investor base. More private investors and hedge funds are establishing a presence in the region, attracted by its growing status as a financial hub.”

Technology has played a crucial role in this retail growth. “People in the Middle East are becoming more aware of FX trading, and they now have access to easy-to-use apps, AI-powered tools, and social trading platforms. This makes it simpler for everyday investors to start trading,” says Isbeer.

The integration of Islamic finance principles into trading products has further expanded market participation. “The rise in Sukuk (Islamic bonds) and Sharia-compliant instruments, in particular cross-border Sukuk issuance has increased the demand for FX from Islamic financial institutions,” Barrett explains.

“At FAB we are among the very few financial institutions who offer several FX derivative products under the Tahawwut (Hedging) Master Agreement (TMA), the Islamic equivalent of the ISDA.”

These adaptations have opened the market to previously underserved investors. “The introduction and expansion of Sharia-compliant FX products has helped unlock new segments of the market, particularly among investors who seek to align their trading activity with Islamic finance principles,” notes Hopkinson, adding that platforms like Bloomberg FXGO have supported Islamic Deposits for several years.

Isbeer points to specific products meeting this demand: “Islamic finance-friendly FX options like Equiti’s Swap-Free accounts, allow investors to trade without interest fees, following religious principles. This has opened up trading to more people who want ethical and transparent investment choices.”

Technological evolution: Platforms, infrastructure, and access

As the Middle East establishes its strategic advantages in the global FX ecosystem, technology has emerged as the critical enabler transforming these opportunities into practical market growth. Regional and international providers are developing specialized platforms, infrastructure, and access solutions tailored to this unique market.

Leading financial institutions across the MENA region have prioritized the development of robust electronic trading capabilities. “At FAB we have built a sophisticated e-FX offering with 24/7 automated pricing and risk management,” Barrett explains. “We are connected to every business unit through a network of internal APIs through which we provide live executable quotes from our e-FX pricing engine.” This internal connectivity extends to external platforms where the bank offers “spot, forwards, swaps, NDFs/NDSs and precious metals,” with development “focused on streaming over traditional RFQ.”

These advancements aren’t limited to conventional trading products. Hopkinson highlights how platforms are adapting to regional requirements: “Bloomberg FXGO, for instance, has long supported electronic trading (RFQs) for Islamic Deposits and is now adding Wa’ad structures in response to feedback from regional banks.”

This customization reflects “a broader trend of localising electronic trading infrastructure to offer greater flexibility, broader instrument support, and enhanced efficiency.”

For retail-focused providers, user experience has become a key differentiator. “Ease-of-use is definitely a big trend that we’re focused on,” notes Isbeer. “Our strategy is to offer smarter platforms with better execution, real-time data, and AI-powered insights that give investors an advantage for trading a wide range of assets in one place.”

The focus on transparency is becoming increasingly important across the region. Anna Senina, highlights this trend: “Buy-side firms are increasingly focused on achieving greater transparency across all stages of execution—from trade-level detail to counterparty analytics and transaction cost analysis (TCA). Service providers are responding to these needs by investing in technology and strategic partnerships. In the MENA region, we’re seeing growing adoption of electronic trading platforms like LSEG FXall, which offer real-time data and analytics to help corporates trade more efficiently and with greater visibility into pricing and execution quality.”

Access to comprehensive data is central to this evolution, with Senina noting that “access to both real-time and historical market data has become a key part of this offering.”

The region’s technological transformation extends beyond trading platforms to foundational infrastructure. “Government backed initiatives, regulatory reforms, and private sector innovation are positioning the region as a global hub for next-gen financial services,” says Barrett. He points to promising innovations like the mBridge project, which has “demonstrated viable cross border CBDC payment rails,” and infrastructure developments such as Khazna, “a JV between G42 and e&, building the largest and most powerful datacentre infrastructure in the region.”

This infrastructure is enabling more advanced technological integration. “The Middle East has embraced fintech as a strategic growth driver,” Hopkinson explains. “The region has launched dedicated fintech hubs and introduced sandboxes to support innovation. This has accelerated adoption of advanced technologies such as blockchain, AI, and automated trading APIs to help streamline operational processes for middle and back office.”

Isbeer echoes this perspective, noting that “AI, blockchain, and automation have been making trading more accessible. Faster transactions, better security, and smarter risk management tools are attracting more traders to the region.”

These technological advances are breaking down traditional barriers to market participation. Barrett highlights how “the UAE has always been at the forefront of adopting biometric technology with groundbreaking solutions such as the UAE Pass which has significantly streamlined the onboarding of customers.”

He emphasizes that “APIs enable direct connectivity between banks, fintech platforms, and corporate treasury systems, allowing real-time FX execution within digital banking apps. They also enhance KYC/AML processes making cross-border FX transactions more seamless and compliant.”

Specific mechanisms for enhancing market transparency are gaining traction in the region. “LSEG FX has long provided the infrastructure and tools to promote transparency and best execution, particularly in frontier and emerging markets,” Senina explains. “One important mechanism is the use of Central Limit Order Books (CLOBs), such as those offered by LSEG FX Matching. These platforms centralize price discovery within the interbank market, acting as the focal point for trading activity.”

She adds that “transparency is further enhanced through multi-dealer platforms like LSEG FXall, which connects users to a wide network of liquidity providers. This setup allows corporates to compare quotes and spreads across multiple providers in real time, ensuring access to the most competitive prices.”

This push toward digital integration is particularly effective in the region due to high smartphone penetration, which Barrett notes “exceeded 97% in UAE in 2024,” driving a “mobile first approach” to meet client demand.

From a global perspective, Hopkinson explains that “the MENA region is increasingly integrating into global markets. From a technological standpoint, the necessary infrastructure and tools are already in place. The key to achieving true efficiency in user workflows lies in supporting region-specific instruments and workflows.”

The combined effect of these technological innovations has been to democratize access to FX markets. “Digital identity verification, instant payments, built-in literacy tools and AI-based customer support are removing old barriers,” Isbeer points out. “More people can now trade FX without long paperwork or complicated processes – and they’re also needing less capital to enter the market.”

The Path forward for Middle Eastern e-FX

As technological capabilities continue to advance across the region, Middle Eastern financial centers are poised for a significant evolution in their e-FX infrastructures and services, setting the stage for the next phase of market development.

The region’s financial hubs are increasingly cementing their global status. “Cities like Dubai and Riyadh are becoming key financial centers, attracting global money and investors,” observes Isbeer.

Hopkinson elaborates on this transformation: “As regional financial centres like Dubai, Riyadh, and Abu Dhabi scale up their global presence, the infrastructure for e-FX is evolving in tandem. Progressive regulation is enabling better price transparency and real-time market oversight.”

This evolution is expected to manifest in several tangible ways. Barrett anticipates structural market changes: “Regional banks historically have faced their clients either on a DVP basis or through bi-lateral credit lines which limits their client base to financial institutions or corporates. 

We believe we will very likely see more CCP and tri-party capabilities emerge which will open up new client types such as hedge funds or asset managers.” These developments would significantly expand market participation and liquidity.

Corporate connectivity is also evolving rapidly. “Corporate banking will become more API driven,” Barrett predicts. “We’re already seeing digital payment providers using embedded finance solutions asking for direct API connectivity into our e-FX desk.”

These changes are unfolding against the backdrop of broader digital banking transformation. “A Digital-First mindset, the rise of neo-banks and fintech challengers fosters an ecosystem where customers expect automated real-time FX conversions,” says Barrett. The competition is intensifying, with Barrett noting that “new entrants such as Revolut – which recently announced a partnership with Wizz Air will further pressure incumbents to raise their game.”

This digital acceleration has tangible implications for FX market participants. “The rise of digital banking and fintech means investors can manage multi-currency accounts, buy gold, trade crypto, and access global markets with ease,” explains Isbeer. “Faster payments and AI-powered financial tools will continue to make FX trading simpler and more accessible.”

The demand for specific trading functionalities is also evolving. “While competitive pricing remains a top priority, corporates are increasingly asking for more advanced trading features that offer flexibility and control,” notes Senina. “Resting orders, options, and fixing orders are in growing demand, as firms look to fine-tune their execution strategies and better manage risk. There’s also a noticeable shift toward the use of algorithmic trading, particularly among banks operating in the region.” 

This trend aligns with Barrett’s prediction about algorithmic execution gaining more widespread adoption over time.

Hopkinson frames these developments in terms of broader market efficiency: “Increased flow and liquidity will lead to further cross border multi-currency settlements and with that demand for efficient real-time and seamless solutions.”

The competitive landscape for e-FX providers is also expected to evolve significantly. Barrett predicts that “algorithmic execution which is commonplace elsewhere will gain more widespread adoption over time,” and that “spread compression will force larger regional banks away from transactional quote and cover, to position based risk management and higher levels of internalisation.”

The implications extend to technology strategy as well, with Barrett suggesting that “larger regional banks will commence building more components in-house to retain IP and offer bespoke solutions to their franchise to differentiate themselves from their peers.”

For investors navigating this evolving landscape, the experts offer valuable guidance. Hopkinson emphasizes the importance of choosing “a technology provider that supports the instruments and workflows used, as well as providing access to the required liquidity.”

Isbeer takes a broader perspective: “The Middle East is taking centre-stage in a global financial revolution. Investors should look for regulated brokers and innovative platforms that offer diversified investment opportunities—whether in FX, gold, crypto, or beyond. The future is digital, and the region is leading the way.”

As global financial centers increasingly look toward the Middle East, the region’s distinctive combination of robust infrastructure, progressive regulation, technological adoption, and strategic location positions it not simply as a participant in global e-FX markets but as an emerging leader helping to shape their future.

For global FX participants—whether institutional providers, corporations, or individual investors—the Middle East now represents not just an additional market but an essential one, offering unique opportunities and insights that will increasingly influence the global e-FX ecosystem.