Saudi Arabia changes Tadawul closing price calculation method

14 April 2014

Move will make market less vulnerable to speculation

The Saudi Stock Exchange (Tadawul) has changed the method it uses to calculate the closing price of shares.

Rather than basing a stock’s closing price on the last trade, it is switching to a volume-weighted average price (VWAP) calculated over the last 15 minutes of trading, which will limit the effect a major last-minute trade could have on the share’s price.

The change has been planned since early 2013 and is meant to limit speculation on stock trading. It will make the market more stable and could attract more interest from institutional investors once the Saudi government decides to open it up to foreign investors.

In April 2013, Mohammed al-Sheikh, the head of the Capital Market Authority (CMA), announced the body was “finalising the regulatory framework” for the opening up of the Tadawul to foreigners. Currently, foreigners do not have direct access to the kingdom’s stock market, but need to perform complicated swaps to gain exposure to Saudi-listed equity.

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