The regulations include a proposed cap on foreign ownership at 10 per cent of the markets value.
An individual foreign institution will also only be able to own a maximum of 5 per cent of the shares of a listed company, the draft rules suggest. Foreign institutions combined would not be allowed to own more than 20 per cent of the listed company.
With a market capitalisation of $580bn, the Saudi Arabian stock exchange is the largest market in the Middle East and North Africa (Mena) region.
Saudi Arabias Capital Market Authority (CMA) announced the opening up the market to foreigners in mid-July, with the Tadawul set to allow foreign direct investment within the first half of 2015.
The opening up of the Tadawul has been long-awaited by investors outside of Saudi Arabia and the Gulf, as up until now foreigners could only invest in the market through a select number of exchange-traded funds and swap agreements.
The draft CMA rules are now subject to a consultation period.