The Saudi Stock Exchange (Tadawul), the biggest bourse in the region, has appointed the UK’s HSBC to advise on its share sale planned for 2018.

“The appointment of a financial adviser is an important milestone in the beginning of the IPO [initial public offering] journey, which is planned to take place by 2018 after obtaining the necessary approvals,” the exchange said in a statement.

Tadawul CEO Khalid al-Hussan told a conference in Riyadh on 3 May that the bourse will select a financial adviser in a few days.

The exchange, which will become only the second regional bourse to undertake a public float after the Dubai Financial Market (DFM), has already conducted an IPO readiness exercise. The appointment of investment banks, a valuation exercise and some of the recent structural changes are all part of the Tadawul’s efforts to execute a successful IPO, Al-Hussan said.

In early May, the Tadawul received approval from the regulator, the Capital Market Authority (CMA), to extend the current T+0 (same-day settlement system of transaction) to T+2. This will improve its chances of getting included in US index provider MSCI’s Emerging Markets Index, which is tracked by investors managing trillions of dollars in assets.

The same-day clearance of the transactions has been the biggest impediment in the flow of investments from foreign institutional investors, and one of the reasons why the exchange has not seen a significant pick up in foreign investments since opening up to foreigners.

The Tadawul aims to be part of the Emerging Markets Index by 2017. However, MSCI had expressed reservations about the bourse’s settlement system and its accessibility to foreign investors. The index provider will now review investors’ feedback and will make a decision, Al-Hussan told the conference.

In early May, the CMA also lowered restrictions on foreign investors, paving the way for increased investments in the exchange, which has total market capitalisation of about $400bn.

The regulator has doubled the limit for qualified foreign investors (QFIs) to own up to 10 per cent in a listed company. QFIs, the institutional investors who can directly buy and sell Saudi stocks, together with their affiliates, were previously restricted to a 5 per cent holding in a single firm.

Resident and non-resident foreign investors are allowed to own up to 49 per cent of a single company. The limit of assets under management for investors to be licensed as QFIs by the CMA has also been lowered to $1bn from the previous $5bn.

To make the Tadawul more attractive to investors, the CMA has also approved the introduction of securities lending and covered short-selling to the market, with regulations for that to be issued before the end of the first half of 2017.