Mohammed Al Rumaih CEO of Saudi Exchange
Mohammed Al Rumaih, CEO of Saudi Exchange (Tadawul), said the launch of single stock futures (SSFs) underlines the capital market’s commitment to introduce new diversified products and deepen the market.
It further offers new financial opportunities for individuals and institutions, while boosting liquidity, he told Argaam in an exclusive interview.
The SSFs are introduced to set the underlying stocks' movement and serve as a hedging tool against potential risks in case of sharp volatility in stock prices.
The SSFs are financial derivatives of some assets. Therefore, the size of a single contract is 100 shares.
“These contracts are expected to boost the stock market liquidity,” Al-Rumaih explained.
The SSFs market will open 30 minutes ahead of trading on Tadawul and will close 30 minutes after the market’s trading session.
Each of the 10 companies to be launched under the first tranche of SSFs will have four contracts for the current and next months, as well as the current and next quarters. New contracts will be issued for the same periods upon their expiration.
Moreover, Al-Rumaih stressed that the SSFs can be traded by all investors, including individuals. However, the ratio and amount of the offered guarantee will depend on investor type. It will stand at 133% for qualified investors and 200% for retail investors (double the initial margin).
The SSFs market is predicted to see a gradual increase in liquidity amid a rise in the number of investors and brokers, as investors will watch the possible of stocks to know how to benefit from available opportunities to boost gains, or hedge against risks through share contracts, Al-Rumaih added.
Elsewhere, Tadawul’s CEO elaborated that the MT30 index futures contracts were driven in the first phase by strategic reasons, and were aimed at a specific category of international investors that follow MSCI.
More than 500 contracts were issued under MT30 index futures at a total value of over SAR 150 million, Al-Rumaih affirmed, noting that investors show growing interest in these contracts, as Tadawul’s weight rises on MSCI.
The SSFs are the second derivatives product to be introduced on Tadawul, after the launch of Index Futures, as part of the wider efforts to develop an advanced capital market in Saudi Arabia.
The first tranche of SSFs will be based on the following listed companies: Al Rajhi Bank, Saudi Aramco, Saudi National Bank (SNB), Alinma Bank, SABIC, stc, Saudi Kayan, Saudi Electricity Co. (SEC), Almarai and Saudi Arabian Mining Co. (Maaden).
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