Saudi stock exchange establishes independent clearing house

06 May 2018
New clearing house will help introduce new asset classes such as derivatives

The Saudi Stock Exchange (Tadawul) has announced it has established an independent clearing house to develop future clearing and settlement services for the Saudi capital market.

The Counterparty Clearing House (CCP) will play a key role in assisting the Tadawul with its expansion plans, through helping introduce new asset classes such as derivatives.

The CCP has been established as a closed joint stock company with a capital of SR600m ($160m).

The Tadawul, Capital Market Authority (CMA) and Saudi Arabia Monetary Authority (Sama) have already initiated the required regulatory procedures to create the CCP, which will enable it to be operational by the second half of 2019, the Tadawul revealed in a statement.

“Establishment of the CCP will facilitate the further growth and product expansion of the capital market by enhancing the post-trade infrastructure to reduce risk, enhance financial stability and attract investment into the Saudi capital market in alignment with international standards and Vision 2030,” Khalid al-Hussan, CEO of Tadawul and Chairman of the Board of Directors of CCP, was quoted in the statement.

The creation of an independent clearing house is the latest of a number of reforms and new initiatives has introduced as part of its target to boost international investment and support its efforts to achieve emerging market status.

In March, Saudi Arabia was upgraded to ‘secondary emerging’ status in the FTSE Russell Global Equity Index Series.

The kingdom had been registered as ‘unclassified’ since it was added to the FTSE Russell watch list in 2015.

The Saudi stock market, which has a capitalisation of almost $500bn, will join the secondary emerging market index in stages between March and December 2019. Inclusion on the index may attract billions of dollars of new foreign portfolio investments to the kingdom’s stock market.

Saudi Arabia is hoping to be granted inclusion in the Morgan Stanley Capital International (MSCI) index. The Tadawul will be assessed for possible inclusion in the MSCI index in June. It was included in MSCI’s watch list in June 2017.

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