Tadawul opens CCP for Saudi capital market
08 May 2018 Riyadh
Image: Shutterstock
The Saudi Stock Exchange (Tadawul) is to open a central counterparty clearing house (CCP) for clearing of securities in the Saudi capital market.
It is expected to be fully operational by H2 2019 and is part of Tadawul’s plans to further develop the Saudi Capital Market by diversifying investment opportunities, and in alignment with Vision 2030.
Vision 2030 is a plan to reduce Saudi Arabia's dependence on oil, expand and diversify its economy by the year 2030.
The team at the new CCP will be responsible for developing future clearing services in accordance with the best international risk management practices and standards.
According to Tadawul, an independent clearinghouse will help to diversify investment opportunities in the market by enabling the introduction of new asset classes such as derivatives and others that will allow investors to diversify their trading strategies.
It will also enable Saudi companies to hedge against risks, an effort to enhance the attractiveness of the Saudi capital market to all investors.
In addition, Tadawul said the CCP will improve risk management of the market by introducing new mechanisms to ensure that the settlement is complete and that all parties meet their obligations when settling trades in the market.
This will further strengthen the current market infrastructure and increase its operational efficiency, according to the Saudi Stock Exchange.
The CCP board of directors has appointed Wael Abdullah Al Hazzani as CCP CEO. Al Hazzani has previously led several functions and number of key projects and programmes within Tadawul.
The Capital Market Authority, Saudi Arabian Monetary Authority and Tadawul have already initiated the required regulatory regime to activate the CCP function.
The exchange previously operated on a T+0 cycle but slowed its system in order to better align itself with other markets.
Tadawul announced in April last year that securities lending, along with the potential for short selling, would be allowed in accordance with internationally established rules.
All securities borrowing and lending or short selling transactions must be recorded internally by all counterparties in compliance with the country’s Capital Market Law, and may be called upon to report this information to the exchange.
It is expected to be fully operational by H2 2019 and is part of Tadawul’s plans to further develop the Saudi Capital Market by diversifying investment opportunities, and in alignment with Vision 2030.
Vision 2030 is a plan to reduce Saudi Arabia's dependence on oil, expand and diversify its economy by the year 2030.
The team at the new CCP will be responsible for developing future clearing services in accordance with the best international risk management practices and standards.
According to Tadawul, an independent clearinghouse will help to diversify investment opportunities in the market by enabling the introduction of new asset classes such as derivatives and others that will allow investors to diversify their trading strategies.
It will also enable Saudi companies to hedge against risks, an effort to enhance the attractiveness of the Saudi capital market to all investors.
In addition, Tadawul said the CCP will improve risk management of the market by introducing new mechanisms to ensure that the settlement is complete and that all parties meet their obligations when settling trades in the market.
This will further strengthen the current market infrastructure and increase its operational efficiency, according to the Saudi Stock Exchange.
The CCP board of directors has appointed Wael Abdullah Al Hazzani as CCP CEO. Al Hazzani has previously led several functions and number of key projects and programmes within Tadawul.
The Capital Market Authority, Saudi Arabian Monetary Authority and Tadawul have already initiated the required regulatory regime to activate the CCP function.
The exchange previously operated on a T+0 cycle but slowed its system in order to better align itself with other markets.
Tadawul announced in April last year that securities lending, along with the potential for short selling, would be allowed in accordance with internationally established rules.
All securities borrowing and lending or short selling transactions must be recorded internally by all counterparties in compliance with the country’s Capital Market Law, and may be called upon to report this information to the exchange.
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