The bill has four main components: the creation of an independent stock market; the creation of a securities and exchange commission to regulate the marketplace; the deregulation of brokerage services; and the creation of a depository centre.

The securities and exchange commission will be responsible for ensuring transparency in trading and company reporting, as well as investigating suspected conflicts of interest and acting as a grievance board. Its powers are expected to extend to the right to search company offices - but not the homes of company executives - to enforce regulations. It replaces the Saudi Arabian Monetary Authority (SAMA - central bank) as the main market regulator.

The law officially comes into implementation 180 days after it is approved by the cabinet, but several parts of the law will take longer to set up. The securities and exchange commission is expected to be given six months to be established and a further two years to put together detailed market regulations covering fund management. Banks are also to be given two years to adapt their services to the new law, which requires the establishment of independent insurance service companies.

The expansion of brokerage services to independent companies will have significant ramifications for the banking sector, which now carries out all brokerage services in the kingdom. However, bankers say they will profit from the breaking of their oligopoly. 'The changes are actually very positive for banks and banks are at the heart of the law change,' says a senior Riyadh banker. 'The new law will give us lots of room to do more things and will lead to a large expansion of the market, so ultimately the banks will benefit.'

Foreigners can buy stock through mutual funds set up by banks. However, direct foreign investment on the market is not dealt with in the new law and has yet to be approved.

'There has to be a deliberate decision to allow foreigners to participate directly in the market,' says Mazen Hassouneh, head of Riyadh-based Rana Investments Company. 'First, the issues of transparency and grievance procedures have to be addressed and be seen to work. We don't want investors to come here only to walk away if there's a hitch with some part of the market.'

The existing interbank bourse was given a major boost in late December by the listing of Saudi Telecom, which offered shares worth about $4,000 million, or 30 per cent of its total capital. The offering closes on 6 January and is expected to be heavily oversubscribed. The shares, which were offered at SR 170 apiece ($45.3), are expected to grow in value significantly over the next two years. Total market capitalisation, including Saudi Telecom, is about $75,000 million.