The Gulf working week against the global market week

Three calendars, not one 

A reader in the Gulf is working inside three different weeks at once, and they do not line up. There is the local business week, which is set by government and differs across the region. There is the regional exchange week, which is set by each venue and no longer matches across the region either. And there is the global market week, which is set by the opening of the first Asian centre and the close of the last American one, and is entirely indifferent to both.

None of the three is the odd one out. They are three separate conventions, each internally coherent, that happen to sit over the same seven days. The practical result is a calendar with two shoulders: a first local working day on which the global currency market has not opened, and a global trading day that falls on a weekend across most of the region.

The business week across the Gulf 

The Sunday to Thursday week with a Friday and Saturday weekend is the long standing regional arrangement, and it remains the arrangement in Saudi Arabia, Kuwait, Qatar, Bahrain and Oman. Friday is the day of congregational prayer, so a weekend built around it is the ordinary case rather than an exception, and it is the reason the regional week is offset from the western one at all.

The United Arab Emirates moved away from that pattern for its federal public sector, which now works Monday to Thursday in full with a shortened Friday, and takes Saturday and Sunday as its weekend. Private employers in the Emirates set their own hours and many have followed, so a single country now contains offices on a Monday to Friday week, offices on a Monday to half day Friday week, and offices still on the older pattern. Anyone coordinating across the Gulf is coordinating across at least two business calendars.

The exchange week is a separate question 

Regional exchanges set their own trading days, and they no longer agree with one another. The Saudi Exchange, the Qatar Stock Exchange, Boursa Kuwait, the Bahrain Bourse and the Muscat Stock Exchange trade Sunday to Thursday. The two Emirati venues, the Abu Dhabi Securities Exchange and the Dubai Financial Market, moved to a Monday to Friday week alongside the change to the national weekend, which aligned them with international markets and simultaneously separated them from their regional neighbours.

That split has a consequence a reader meets before any of the theory. On a Sunday, several Gulf equity markets are trading normally while the global currency market is shut and the Emirati venues are closed, so a regional price is moving with no reference price beside it from anywhere else. On a Friday the arrangement reverses, and the two Emirati venues are trading into a global day that the rest of the region is not working.

Where the global market week starts and stops 

The foreign exchange market has no central venue and therefore no opening bell, but it does have a weekend. Quoting stops when the last American centre finishes on Friday afternoon in its own time, and resumes when the first Australasian centre opens on Monday morning in its own time. Converted into Gulf local time, both boundaries fall in the small hours: the week ends in the early hours of Saturday morning and begins again in the early hours of Monday morning.

Reading the first and third rows together gives the whole of the mismatch. Friday carries a full global trading day, including the American session and the releases that land in it, into a regional weekend. Sunday carries a regional working day, and five regional exchanges, into a global weekend. Four days of the week are unambiguous and two are not, which is a more useful description of the Gulf calendar than either the local week or the market week on its own.

What the mismatch changes 

• News arrives into a shut market. Anything that happens between the Saturday morning close and the Monday morning reopen is absorbed at the reopen rather than during the weekend, which is the mechanism behind an opening price away from the previous close. A resting order priced inside that distance is executed at the first available price rather than at the price on the order.
• Regional prices move with no global reference. A Sunday session on a Gulf exchange runs while the currency, index and commodity markets that would ordinarily frame it are closed, so the first cross reference arrives a day later.
• Settlement conventions run on business days, not calendar days, and the definition of a business day depends on the currencies involved. A trade in a pair whose two currencies observe different weekends has a value date computed against both calendars.
• Financing accrues on calendar days even where quoting does not. Because the market is shut over the weekend, the convention is to charge the weekend's financing on a single designated weekday, so one day of the week carries several days of adjustment. The day used is published in the contract specifications, and it differs by instrument type.
• Support and operations coverage is a separate question from market hours. A firm's stated coverage window is its own published fact, and it is neither implied by the global market week nor by any local business week.

The weekend gap, stated as arithmetic 

The most consequential feature of a two day closure is that the price at which quoting resumes is not required to be the price at which it stopped. Between the two instants there is no market to trade through the difference, so the difference appears all at once as a step rather than as a path. A protective instruction that names a price is filled at the first price actually available past it, which in a step may be some distance away.

Where practitioners disagree 

One argument concerns whether aligning a regional exchange week to the international one is a net gain. The case for alignment is that a venue trading on the same days as the funds that might allocate to it is easier to include in an international portfolio, and that a shared calendar removes a standing operational cost. The case against is that alignment surrenders a day on which regional price formation happened without competition from larger markets, and that the region's own institutions still work on the older week. The two Emirati venues took one side of that argument and their neighbours took the other, so both positions are currently being run as live experiments.

A second argument concerns the weekend closure itself. One tradition treats a shut market as a defect, on the grounds that information does not stop arriving and a market that cannot price it merely defers the adjustment. Another treats the closure as a feature, arguing that a market with almost no participants would produce prices that are worse than no price at all, and that concentrating the adjustment into a reopen at least concentrates it into a moment when the participants are present. Neither position is settled by evidence, because the counterfactual is unobservable.