The Scoop
Saudi Arabia’s stock exchange has revamped derivatives trading rules in a bid to attract more foreign investors and increase liquidity, as the bourse looks to kick-start trading activity in the wake of the Iran war.
The Saudi Exchange has slashed trading fees and secured a group of firms to act as market makers to guarantee that investors can always find a counterparty, along with other structural changes to the market, according to a statement sent first to Semafor. The new rules have been in testing since Aug. 19, and have already resulted in derivatives trading jumping to around $60 million since then, from almost nothing.
The Saudi bourse launched its first derivatives, which investors use to hedge exposures or speculate on future stock moves, in 2020, but trading activity never really took off. Tadawul, as the exchange is known, is looking to develop derivatives trading as a new source of revenue to help diversify its income at a time when fee income from stock trading has slumped.
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Saudi Arabia has been working on several measures in a bid to boost trading volumes on the stock exchange and reenergize new stock listings that had been faltering even before the Iran war spooked investors.
The kingdom’s market regulator lifted restrictions on foreign investors buying local stock last year, and is also reviewing limits on how big a stake they can hold in Saudi firms. The regulator is also investigating the poor performance of recent initial public offerings, according to people familiar with the matter, and questioning the advice given by investment banks to companies selling stock, Semafor reported this month.