| RIYADH, April 25
RIYADH, April 25 Saudi Arabia's stock exchange
should be ready to introduce equity futures and options in about
24 months, after it completes reforms to help it manage the
risks of such products, the exchange's chief executive Khalid
Futures and options would provide hedging tools for the
foreign institutional investors that are expected to enter Saudi
Arabia with the listing of national oil giant Saudi Aramco,
expected next year, and with the market's entry into MSCI's
emerging market index, which may occur in mid-2019.
It is part of the rapid growth of the exchange, the Arab
world's largest with a capitalisation of $436 billion, about
two-thirds the size of leading emerging market Moscow's, but
One necessary reform was launched on Sunday, when the
exchange moved from same-day settlement of trades to settlement
within two working days of execution. It also allowed covered
short-selling of stocks.
In addition, the exchange is in the process of setting up a
clearing house, which will be at the centre of managing trading
risks, and replacing its back-office technology, also vital to
handle equity derivatives, 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.
"So I would say our plan is to look at this in the next 24
months, so everything is in place within that window."
The Saudi stock market looks set for even more growth in
coming years partly because of a government reform programme
launched last year to diversify the Saudi economy beyond oil by
The programme includes privatisations, and these are likely
to result in around 100 new stock market listings in sectors
including mining, healthcare and retail, HSBC's chief executive
for the Middle East said last week. Close to 180 companies are
currently listed on the Saudi exchange.
Sarah Al-Suhaimi, chair of the exchange and also chief
executive of local investment bank NCB Capital, said investment
banking activity in the country had been increasing since last
year because of preparations for privatisation.
Also, the exchange's launch in February this year of a
parallel market with streamlined listing rules and disclosure
requirements was creating interest among smaller and family-run
firms that previously might not consider listing, she said.
"Attracting new investors, create more liquidity, having
more international standards, being on indices... All these
things will attract more issuers to list in our market, so it is
all interconnected," she said.
The exchange opened to direct investment by foreign
institutions in mid-2015 and last year made it easier for
companies to meet standards to become Qualified Foreign
The exchange does not disclose the identity of QFIs but
Suhaimi said their number had now risen to about 60. She called
that number unsatisfactory but predicted it would rise in the
wake of the recent reforms and if Saudi Arabia joined
international equity indexes.
In June, international index compiler MSCI will announce a
list of countries under review for possible inclusion in its
emerging market index; entry into the index would attract
billions of dollars of foreign funds.
The exchange has taken the steps needed to meet the
requirements, now they will have to wait for institutional
investors to give their feedback to MSCI, Suhaimi said, adding
she was generally optimistic.
($1 = 3.7501 riyals)
(Reporting by Andrew Torchia and Marwa Rashad; Editing by)