Proprietary trading carries its own risks and
rewards. But do the risks – and returns –
look different from 31 floors up Dubai’s Jumeirah
Lake Towers? Tom Osborn meets Middle Eastern
trading arcade, the Dubai Professional Trading
"For traders in London, I just don’t see the
point," says Ed Allington of Dubai Professional Trading Group.
"You could be working in the sun for about the same cost."
As many London prop traders scuttle to work under darkened,
ominous April skies at 5am, they may be rent by more than a
brief pang of jealousy. The view from Jumeirah Lake Towers,
home of DPTG – "the first trading arcade in the Middle
East", as chairman James Hume (pictured below) claims
– is breathtaking.
The prop shop’s recruitment strategy has been
firmly geared towards the young elite of London’s
trading desks, who are ready to up sticks and move to what
remains the jewel in the Middle East’s crown.
"I’ve worked in a number of arcades," says
Allington, a veteran prop man and one of DPTG’s
most experienced traders.. "If you walked into this office
today, you could be walking into Marex or Elite [Derivatives]
in London. People like familiar surroundings."
Use of the firm’s private swimming pool, squash
court and gym certainly help in this regard. Stunning views
over Dubai’s marina district are, however,
anything but familiar. The group has 15 experienced traders,
most of them with a background in the City. And until now,
Dubai hasn’t been a difficult sell.
"It’s had a bit of a bad press lately, but
it’s a wonderful place," Hume insists. "It
attracts the younger guys from trading desks in London, who
want to have some fun."
The firm offers a signing-on package, designed to cut
through bureaucracy and help a trader acclimatise when he or
she first moves to the country. From house hunting to school
enrolment for children, the firm’s patented Total
Assistance Programme aims to think of everything. "We do it all
for them," says Hume, a former treasurer of Bank of
America’s international private bank and director
of trading at BofA and Credit Suisse.
There is even a final list of dos and don’ts,
prepared for traders upon arrival – worth bearing in
mind for those who come seeking "Dubai’s tax-free
status and stimulating lifestyle", as the firm’s
corporate brochure puts it.
For all its appeal to young, upwardly mobile City traders,
this is still a religiously conservative country –
certain beach-time activities remain a definite no-no.
Safe from the taxman
"I think Dubai’s a nice place to be," Hume sums
up. "We don’t have to get up at five
o’clock for the opening of the European
And, with no income tax, the wallet enjoys Dubai too. As
Hume says: "It’s incredibly tax-efficient."
Tax has become a sore point among City high-earners in the
past couple of years. First the Labour government moved to
crack down on the tax advantages enjoyed by private equity
firms; then there was a windfall tax on banks’
2009 bonus pools; and since April 6 there is a new 50% top rate
of income tax for those earning more than £150,000. The
Conservative Party, expected to win the May 6 general election,
has not said it will repeal this tax.
"We’ve had a flurry of traders looking at
leaving London after the new rate comes in," says Allington
Dubai’s financial attractions go further. The
firm’s website lists a monthly cost of living
index versus the UK, seemingly designed to make a Surrey
commuter weep: petrol, £165 cheaper; pizza delivery (10
times monthly), £32 cheaper...
A people business
model is simple – providing a professional trading
floor and training to attract and nurture talented traders who
will rent desks at the firm.
Hume insists his focus is firmly on the long haul, not a
quick profit. "We want to make sure we have good, long term
[people]," on board, he says.
They need to be good to make money – renting a
trading desk costs $2,500 a month. Clearing costs depend on
Jamie Lear, the arcade’s chief risk officer and
head of trading, explains: "These guys are self-employed
– they’re self-backed and
What they get from DPTG is an escape from the isolation of
trading on one’s own – some support,
technical, administrative and psychological.
"They’re extremely well-funded," Lear says,
"[but] they like to be stopped out if they’re
having a bad day – a cup of coffee, an arm around the
The asset classes traded at DPTG are as diverse as the
traders themselves. "Everybody [trades] a lot of oil and gold,
as you’d expect," Hume says, "and a lot of equity
derivatives of all kinds. We really don’t try and
interfere with what people are trading, providing
we’re aware of the risk. At any time, the doors
are open. There’s always someone on the risk
This regional bias aside, the market picture is not a far
cry from London. "Our biggest trader’s in oil,"
Lear (pictured below) confirms. "[But] our traders
cover virtually every market. You still get people hanging
around till midnight, trading CBoT and CME."
Allington agrees. "We’re in all the standard
prop traders’ markets," he says. "We trade Dax,
S&P, Schatz, Bund, Bobl. We do a little bit of currency but
mainly it’s bonds and US equity."
Some might be surprised to find that algorithmic trading,
hailed as the sharp end of the modern market by advocates but
bemoaned by traditionalists as "not proper trading at all", as
one senior industry figure put it recently, does not feature
highly at DPTG. "We’re all manual," says Lear.
"This is going back to the way things were before the algo
He adds: "People are very happy with the way things are...
prop traders tend to be very conservative. It’s
difficult to tell them to change once they’ve
found something that works for them."
In any case, argues Allington, the advantages of algorithmic
trading are heavily skewed towards high volume institutional
investors. "No one’s running a black box under
their desk. Unless you’re a bank,
it’s not worth fighting over that millisecond
And what of the competition? Is Hume not worried that, after
he has put so much effort into attracting London’s
young traders, they might simply up and leave to another
"There are one or two little shops around," he reveals. "I
find it surprising we haven’t seen more
But he is not worried, he insists – mainly because
barriers to entry in the emirate remain higher than in
deregulated markets such as London. "It took us a year to get
up and running, and that was with the government as a business
partner," he concedes. "It can be a logistical nightmare. I
know there are a few people sniffing around, but no one
"The government of Dubai has its own problems at the
moment," Hume adds, with a little understatement.
October’s call for a standstill on property
developer Nakheel’s $3.5bn sukuk shocked global
capital markets, and thrust the country’s debt
obligations into an unwelcome spotlight.
While its immediate sovereign crisis appears to have been
taken care of by Abu Dhabi, the United Arab
Emirates’ oil-rich sugar daddy, the
country’s future looks a little more cloudy than
it did when DPTG opened its doors in 2007.
As one wag pointed out rather unkindly last month, even the
Burj Khalifa – the world’s new tallest
building – had to shut its observation deck barely a
month after opening, owing to maintenance problems.
Educating for the future
Hume, however, is undeterred. "We’re very much
in expansion at the moment," he says, arguing that investor
education will be key to breaking the Middle Eastern market.
"There’s a pretty low level of market expertise
over here, mainly because Dubai is so new to these
This is why training forms such a large part of
DPTG’s work. "We started [to offer training] about
five months ago," Hume says. The firm has a development
programme for retail investors and budding traders hoping to
secure a place at the firm. "Now, we’re working on
offering training to the people who need to understand
trading," Hume says.
And there is an ever-increasing focus on attracting local
talent. "At least a third of our traders come from his region,"
Allington says. "We’re putting a lot of effort
into that. It’s the way things are going."
In years to come, DPTG may no longer exist primarily as a
haven for expats, but could grow into a centre for a new
indigenous trading community.