Saudi Exchange Runs First Derivative Market on Nasdaq Technology

Saudi exchange operator, Tadawul, has officially went live with the country’s first derivatives venue and clearinghouse in an effort to draw more ‎capital into the local markets‏. The Saudi Stock Exchange has previously inked technology agreement with Nasdaq (NASDAQ:NDAQ) to provide it with a full suite of integrated marketplace solutions.

Nasdaq’s real-time clearing solution will provide the new marketplace, called ‘The Securities Clearing Centre Company (Muqassa)’, with high-velocity multi-asset class clearing, settlement and risk management capabilities.

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The step comes in line with many initiatives to facilitate the growth of the Saudi capital markets by improving the post-trade infrastructure and reducing counterparty risk. It also enables Muqassa to introduce new financial products and services after it launched trading on Saudi Futures 30 Index (SF30), the kingdom’s first exchange-traded derivatives product.

Muqassa commenced operations on August 30, nearly two years after it was established as the central counterparty clearer in the Saudi financial markets.

“The launch of Derivatives Market will provide investors with hedging tools to more effectively manage risk and gives expanded opportunities to gain exposure to the Saudi capital market, the largest and most liquid market in the region,” said Tadawul’s CEO Khalid Alhussan.

“We are pleased to celebrate the launch of Tadawul’s new derivatives market and CCP, as well as further extending our technology relationship. Nasdaq is fully committed to supporting Tadawul through this important transformation,” added Lars Ottersgård from Nasdaq.

Saudi exchange opens itself to foreign investment

‎Saudi Arabia has also simplified requirements for qualifying the affiliates of ‎institutional investors, with their subsidiaries and managed funds now could be ‎approved without submitting a separate application for each of them.

The CMA also recognized a wider range of other regulatory jurisdictions as ‎acceptable to Saudi Arabia. Earlier in 2019, the ‎securities regulator granted Riyad Capital its approval to offer forex trade services, which was the first forex broker license in Saudi Arabia.

Foreign investors were originally allowed to start investing directly in Saudi ‎Arabia’s stocks market in 2015. The CMA reduced minimum requirements for the ‎institutions in 2016 and is now proposing a fresh round of reforms, as ‎Riyadh seeks to draw more capital into the market before the listing of state ‎oil giant Saudi Aramco.‎

Saudi Arabia’s reforms are part of Vision 2030, an economic reform plan ‎aimed at reducing historical high dependence on oil by diversifying the ‎country’s economy and transforming how the kingdom generates ‎public income.‎

Saudi Aramco initial public offering (IPO) was the biggest business event that hit public markets around the world in 2019. The biggest ever public offering values the company at $2 trillion. It has raised $25.6 billion as Saudi Arabia is seeking to diversify its economy away from oil by investing in non-energy industries.

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