International Finance

Saudi Stock Exchange Officially Transitions to T+2 Settlement Cycle

Shift strengthens the Saudi equity market and provides global investors with greater asset. Security Tadawul also introduces securities borrowing and lending and covered short selling

Saudi Stock Exchange (Tadawul) announced the successful completion of its transition to a T+2 settlement cycle for all listed securities, which went into effect on Sunday, 23 April 2017. The announcement comes just one year after the Capital Markets Authority (CMA) granted Tadawul regulatory approval to amend the settlement cycle to two subsequent business days from the trade execution date.

The move to T+2 is the latest step the Exchange has taken to further align the Saudi capital market with international standards and make it more attractive to both domestic and foreign investors. The transition increases the level of asset safety for investors by providing enough time to verify trades and unifies the settlement duration for all types of listed securities across most international markets.

In conjunction with the launch of T+2 settlement, Tadawul also introduced securities borrowing and lending and covered short selling, and is the first market in the region to offer stock lending and covered short selling for all listed stocks. This will significantly enhance the ease of trading and creates new opportunities for global market participants, many of whom use securities lending and borrowing to manage the settlement process.

“Tadawul’s shift to T+2 and introduction of securities borrowing and lending together with other recently implemented changes constitute a major delivery of far-reaching capital market reforms to enhance access, liquidity, efficiency and transparency in the Saudi market,” said Khalid Abdullah Al Hussan, Chief Executive Officer of Tadawul. “With these changes, we are determined that Tadawul will become an important new factor in global equity markets, both as a source of capital and an investment destination.”

Through the QFI program, international investors now have direct and full access to the Tadawul, the largest equity market in the Gulf Cooperation Council (GCC) and Middle East and North Africa (MENA) regions, the tenth largest emerging market and the 23rd largest stock market in the world overall with a market cap in excess of $400 billion. QFI qualifying criteria and foreign ownership limits were recently eased and the Saudi IPO market is now open to QFIs. More than 60 international financial institutions representing more than $18 trillion in investable assets have already become QFIs.

“As we continue to strengthen the market, we expect to receive further interest and commitments from investors through the Kingdom’s QFI program,” continued Al Hussan. “Feedback on implementing the T+2 and securities borrowing and lending has been encouraging and points to rising investor confidence in our market.”

“We will continue to build on our role as the regional hub to lead capital market development in the GCC and the wider MENA region, as well as globally through the Kingdom of Saudi Arabia’s Qualified Foreign Investor (QFI) program,” Al Hussan added.

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