Tadawul, the Arab world's biggest bourse, will introduce exchange-traded derivatives next month, as it looks to broaden its product offerings to make the Saudi equity market more attractive to foreign investors. The launch date of the Derivatives Market will be on Sunday, 30 August 2020, marking the beginning of trading in the Saudi Futures 30 (SF30) Index Futures Contract, Saudi Arabia’s first exchange-traded derivatives product.
The SF30 Index Futures Contract is based on the MSCI Tadawul 30 (MT30) Index. The SF30 will provide investors with hedging tools to more effectively manage risk and will deliver expanded opportunities to gain exposure to the Saudi capital market, Tadawul said. As the market develops, the bourse has plans to roll out more derivatives products such as Single Stock Futures, Single Stock Options, and Index Options.
“Today, we can proudly say that our capital market is not only the largest in the region but also developing faster than most exchanges in terms of both the products and the services we offer. The introduction of derivatives trading is further evidence of our commitment to providing our investors with diversified, innovative products and services to meet all their needs” Eng. Khalid Al Hussan, CEO of Tadawul commented.
(Tadawul's benchmark TASI index performance July 2019-July 2020)
“The launch of the Derivatives Market in Saudi Arabia as one of the Financial Sector Development Program (FSDP) key initiatives under the Saudi Vision 2030 is a significant step in introducing sophisticated market products and creating a trading environment attractive to local as well as international hedgers and traders” Al Hussan added.
Saudi Arabia's equity market also introduces an independent clearing house paving the way for derivatives trading. Known as Muqassa, the clearing house will also start operating on August 30, clearing MT30 Index Futures Contract.
The recently amended Capital Market Law, the Securities Central Counterparties Regulations, the Securities Clearing Center Rules and Procedures will aid in regulating the securities clearing center and activating its role in performing its duties and obligations within the capital market infrastructure institutions, Tadawul said in a separate statement.
The Saudi Stock Exchange represented 76% of total market capitalisation of the Middle East and North Africa (MENA) region at the end of 2019. Following the listing of state-owned oil giant Saudi Aramco, the largest IPO in history, Tadawul is the 9th largest stock market among the 67 members of the World Federation of Exchanges. Tadawul's benchmark index TASI has decreased 961 points or 11.50% since the beginning of 2020, as the economy has been hurt by lockdowns imposed after the virus outbreak and a slump in oil prices. The Exchange is supervised by the Capital Market Authority and lists 171 publicly traded companies. It becomes the second exchange in the region to offer derivatives trading after the Nasdaq Dubai.