Saudi Arabia opens door to securities lending
04 May 2016 Riyadh
Image: Shutterstock
Saudi Arabia’s Capital Markets Authority (CMA) has approved the introduction of securities lending and covered short selling to the Saudi Stock Exchange from H1 2017.
In a statement on the regulatory reform, the CMA stated: “The CMA aims for these measures to provide greater stability to the overall capital market environment, through applying international best practices, incentivising investors in an environment that supports the national economy.”
In addition, the CMA has approved the Saudi Stock Exchange’s request to amend the transactions settlement cycle of listed shares from T+0 to T+2 in order to align it with other international markets. The shift will also take effect in H1 2017.
The incorporation of securities lending and short selling comes as a part of an extensive overhaul of the Saudi Stock Exchange’s framework in a drive to encourage foreign investment into the country.
The initiative began on 15 June 2015 with the approval of regulatory amendments to allow qualified foreign financial institutions to invest directly in Saudi Arabia-listed shares.
This latest review is now set to loosen rules further to enable foreign investors to own larger stakes in listed companies, with a new cap of 10 percent of the shares outstanding of a single issuer for each investor.
All foreign investors in a Saudi Arabia-listed company, including residents and non-residents, must not own no more than 49 percent of the shares of any listed company, unless company’s bylaws state this must be lower.
In a statement on the regulatory reform, the CMA stated: “The CMA aims for these measures to provide greater stability to the overall capital market environment, through applying international best practices, incentivising investors in an environment that supports the national economy.”
In addition, the CMA has approved the Saudi Stock Exchange’s request to amend the transactions settlement cycle of listed shares from T+0 to T+2 in order to align it with other international markets. The shift will also take effect in H1 2017.
The incorporation of securities lending and short selling comes as a part of an extensive overhaul of the Saudi Stock Exchange’s framework in a drive to encourage foreign investment into the country.
The initiative began on 15 June 2015 with the approval of regulatory amendments to allow qualified foreign financial institutions to invest directly in Saudi Arabia-listed shares.
This latest review is now set to loosen rules further to enable foreign investors to own larger stakes in listed companies, with a new cap of 10 percent of the shares outstanding of a single issuer for each investor.
All foreign investors in a Saudi Arabia-listed company, including residents and non-residents, must not own no more than 49 percent of the shares of any listed company, unless company’s bylaws state this must be lower.
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