The Saudi Stock Exchange (Tadawul) plans to introduce equity futures and options in about 24 months, after undertaking reforms to help manage risks associated with such products, CEO Khalid Al Hussan told Reuters.
Futures and options would provide hedging tools for the foreign institutional investors the Kingdom expects to attract with the listing of state-owned oil giant Saudi Aramco next year, and with the Saudi market’s inclusion in MSCI’s emerging market index – expected in mid-2019.
Tadawul this week moved from same-day (T+0) settlement of trades to a T+2 settlement cycle, which allows a two-day settlement period for transactions.
The stock exchange is also currently establishing a clearing house, which will be at the center of managing trading risks, and replacing back-office technology, Hussan said.
“It is very important to look at the size of the Saudi capital market, and the risk associated with such size, so we have to have all controls in place before we think about introducing” equity derivatives, he said.
International index compiler MSCI will announce a list of countries in June this year that will be placed under review for potential inclusion in its emerging market index.
Entry into the index could attract foreign fund inflows worth billions of dollars, it was reported.
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