Tadawul introduces new changes to improve investor access, liquidity

The Saudi Stock Exchange (Tadawul) on Wednesday announced a series of enhancements to improve market access, efficiency and liquidity, the bourse said in a statement.

Tadawul will update its independent custody model (ICM) to enhance Qualified Foreign Investor (QFIs) access to the market by provide more flexibility in trading limits for ICM clients.

New measures will be introduced to mitigate credit risks linked to the settlement process for all participants.

The market will also introduce a new optional model to allow asset managers to aggregate orders of managed assets - discretionary portfolios (DPs) and investment funds.

The changes to the ICM and introduction of the option for asset managers to aggregate orders will come into effect January 21, 2018.

It will also move to an auction method to determine closing prices and implement a market-making program aligned with global best practices, the statement added.

A Volume Weighted Average Price (VWAP) will be used to an auction method for determining closing prices for both the Main Market and Nomu Parallel Market.

The opening price auction will be enhanced in line with practices adopted by most other major markets.

The bourse will also implement a Market Making (MM) Program based on global best practices to boost liquidity, facilitate orderly price formation, fortify the sukuk, bond and ETF markets and pave the way for ETPs and derivatives.

The changes to the methods for determining opening and closing prices and introduction of the Market Making program are scheduled to be implemented by Q2 2018.

“The cumulative impact of these measures will be a more efficient, liquid and secure market for investors and intermediaries that is further aligned to international best practices,” Khalid Abdullah Al Hussan, Tadawul’s, chief executive, said.

Al Hussan added that the Saudi exchange is taking all measures necessary for planned initial public offering (IPO) of oil giant Saudi Aramco.

Tadawul is bracing for any listing structure that the company decides to use for the listing.