Tadawul seeks public input on draft amended market rules

The Saudi Exchange (Tadawul) announced public consultation on the draft amended market rules.

The initiative comes as part of Tadawul’s commitment to involve stakeholders in providing their views on the market’s regulatory framework.

The proposed draft amendments aim to broaden the categories of qualified investors in the Nomu-Parallel Market by introducing a new classified category and easing the standards and requirements for eligible investors to trade and invest in the market.

These changes are expected to have a positive impact on the financial market.

The proposed amendments also include changes to the market value requirement for publicly held shares and the expected aggregate market value requirement as of the listing date for all shares to be listed on Nomu.

Furthermore, the amendments also aim to align with the Capital Market Authority’s regulations, as amended to implement the new Companies Law.

The proposed amendments introduce several new terms and revise existing ones. New terminology includes "company spin-off" and "qualified investor in the Parallel Market," while updates have been made to terms such as "demerger," "substitute demerger," "qualified investor," "Parallel Market," and "demerged entity." In addition, terms like "removal" and "dissolution of a merger" have been removed entirely.

Article 18, which relates to listing requirements for entities resulting from a company spin-off, has also been revised. According to the updated article, a spin-off entity will not be deemed suitable for listing if its assets and operations closely resemble those of the existing issuer. This assessment considers the business activities of both the issuer and the spin-off entity, as well as the commercial rationale behind the listing.

Moreover, the issuer must retain a sufficient level of operations and assets to support its independent listing status after the spin-off. This means it must maintain its own adequate business activities and assets, in addition to its ownership stake in the newly created spin-off entity.

A clear distinction should be made between the business activities retained by the issuer and those transferred to, and retained by, the entity resulting from the spin-off. The spin-off must also be able to operate independently, with its own executive management and administrative capabilities, without reliance on the issuer—except for essential shared administrative or non-executive functions.

The amendments further include changes to Article 42, concerning trading eligibility in Nomu, and Article 43, which sets the conditions for listing shares in that market.

Under chapter 8 of the Listing Rules, a qualified investor in the Parallel Market is defined as any of the following: financial institutions acting on their own behalf; clients of a licensed financial institution authorized to conduct asset management, provided the institution is empowered to make decisions about participating in offerings and investing in the Parallel Market without prior client approval.

This is in addition to the Saudi government, any governmental entity, any international organization recognized by the Capital Market Authority (CMA) or Tadawul, as well as any financial market approved by the CMA or the the Securities Depository Center Co. (Edaa).; and government-owned companies, , either directly or through a portfolio managed by a capital market institution licensed to carry out asset management activities.

Also included are companies and funds established in Gulf Cooperation Council (GCC) countries, investment funds, non-resident foreign investors permitted to invest in Nomu under CMA guidelines, qualified foreign financial institutions, and any other legal entities allowed to open both an investment account in Saudi Arabia and an account at Edaa.

Natural persons may also qualify as investors, provided they are eligible to open both an investment account in Saudi Arabia and an account at Edaa, and meet at least one of the following criteria: they have conducted securities transactions totaling at least SAR 30 million over the past 12 months; possess net assets of no less than SAR 5 million; or have at least three years of professional experience in the financial sector.

Additionally, eligibility may be granted to individuals who hold a General Securities Qualification Certificate approved by the CMA; possess a professional certificate in securities business from a globally recognized body; serve as board members or committee members of companies listed on the Parallel Market; or any other persons specifically designated by the CMA.

The deadline to provide feedback via Public.Consultation@tadawulgroup.sa is Aug. 19.

All opinions and comments will be reviewed and given due consideration for inclusion in the final draft, Tadawul said.