Tadawul hires Nasdaq for tech ‘transformation’

Nasdaq will deliver new cash and derivatives clearing systems to the Saudi Stock Exchange. (Reuters)
Updated 04 December 2017
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Tadawul hires Nasdaq for tech ‘transformation’

DUBAI: The Saudi Stock Exchange has taken a major step toward transforming its financial infrastructure after signing a deal with Nasdaq, the US market based in New York.
Tadawul, the Riyadh-based market, on Monday announced an agreement with the US group to upgrade its post-trade technology, including registry, depository and risk-management systems, to be completed by the second half of 2020.
Nasdaq will deliver new cash and derivatives clearing systems, in a bid to bring the Riyadh exchange into line with global best practice in securities trading, according to a joint statement about the planned “transformation” at the Tadawul.
“We are very keen on investing in cutting-edge technologies to offer a fast and efficient post trade platform,” said Tadawul CEO Khalid Abdullah Al-Hussan.
“This crucial step goes hand in hand with all the market enhancements we have undertaken to integrate securities trading in Saudi Arabia with global equity markets and enhance post-trade infrastructure and efficiency for local and foreign investors.”
Tadawul has embarked on a strategy to modernize the infrastructure of the Arabian Gulf’s biggest stock market to enable it to handle the big economic changes planned under the Kingdom’s Vision 2030 strategy.
Proposed sales include the $100 billion initial public offering (IPO) of shares in the national oil champion Saudi Aramco, and a $200 billion sell-off of state-owned companies ranging from power generators to football clubs. At the Future Investment Initiative in Riyadh in October, Al-Hussan said he was confident Tadawul could list the Aramco IPO “exclusively” in Saudi Arabia.
Earlier this year, Tadawul announced major changes to its share trading regime, moving to the “T+2” settlement cycle used in most of the world, allowing foreign financial institutions to own shares directly in the Kingdom, and enabling “short selling” of shares.
Adena Friedman, president and chief executive of Nasdaq, said: “The ambition of Tadawul to become an innovative, world-leading exchange company is not only admirable but inspiring to our industry. By addressing the demand to overhaul, modernize and evolve its post-trade infrastructure, this demonstrates a clear vision by Tadawul to attract capital — both domestic and foreign — and present Riyadh as a major financial destination with best-in-class technology operating at its core. As a long-term partner, we are proud to be supporting Tadawul in their ambitious efforts and incredibly bright future.”
Securities industry experts welcomed the Tadawul-Nasdaq deal. Jeff Singer, former chief executive of Nasdaq Dubai and now a lecturer in business at the American University of Sharjah, said: “It’s a pretty big shift. They’ll need help from the experts at Nasdaq to reach their goal of looking like an international stock exchange. They will certainly need this kind of trading infrastructure to handle the volumes expected in the Aramco IPO and the rest of the privatization program.”
Oliver Schutzmann, chief executive of regional investor relations firm Iridium, said: “It’s good the Tadawul is getting ready for the investor revolution that is coming. The post-trade infrastructure is crucial for investors, long after the excitement of an IPO has faded.”
The new post-trade technology will replace Tadawul’s current systems, which were implemented in 2001.
In addition to introducing a new central counter-party clearing process, this transformation will enable both Tadawul and market participants to introduce new asset classes to the market and offer new services to the investors.
“These changes will increase efficiency, effectiveness and further growth of the market, supported by a modern flexible and efficient technology that reduces risks in the post-trade area in compliance with international best practices and standards,” Tadawul said in a statement. The deal also suggests that, in the debate over where the Aramco IPO should be listed in addition to Tadawul, Nasdaq has not given up hope in the face of competition from its rival New York Stock Exchange, as well as bourses in Hong Kong and London.
Some of the biggest companies in the world, including Apple, Microsoft, Facebook and Google owner Alphabet are listed on Nasdaq, though most big oil companies are listed on NYSE.
President Donald Trump hinted last month at ongoing interest by Nasdaq in the Aramco listing when he told journalists on board Air Force One: “I want (Aramco) to very strongly consider the New York Stock Exchange or Nasdaq or frankly anybody else located in (the US).”


Saudi stocks receive landmark emerging markets upgrade from MSCI

Updated 21 June 2018
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Saudi stocks receive landmark emerging markets upgrade from MSCI

  • Market authorities in Saudi Arabia have introduced a series of reforms in the past 18 months
  • MSCI’s Emerging Market index is tracked by about $2 trillion in active and global funds

LONDON: Saudi Arabian equites are poised to attract up to $40 billion worth of foreign inflows, following a landmark decision by index provider MSCI to include the Kingdom’s stocks in its widely tracked Emerging Markets index.

"MSCI will include the MSCI Saudi Arabia Index in the MSCI Emerging Markets Index, representing on a pro forma basis a weight of approximately 2.6% of the index with 32 securities, following a two-step inclusion process," the MSCI said in a statement late on Wednesday night Riyadh time.

“Saudi Arabia’s inclusion in MSCI’s EM Index is a milestone achievement and will likely bring with it significant levels of foreign investment,” Salah Shamma, head of investment for MENA at Franklin Templeton Emerging Markets Equity, told Arab News. 

“It is a recognition of the progress Saudi Arabia has made in implementing its ambitious capital markets transformation agenda. The halo effect of such a move will be felt across the stock exchanges of the entire Gulf Cooperation Council (GCC).”

Market authorities in Saudi Arabia have introduced a series of reforms in the past 18 months to bring local capital markets more in line with international norms, including lower restrictions on international investors, and the introduction of short-selling and T+2 settlement cycles.

Such reforms prompted index provider FTSE Russell to upgrade the Kingdom to emerging market status in March, opening the country’s stocks up to billions worth of passive and active inflows from foreign investors.

MSCI’s Emerging Market index is tracked by about $2 trillion in active and global funds. The inclusion of Saudi stocks in the index, alongside FTSE Russell’s upgrade, is forecast to attract as much as $45 billion of foreign inflows from passive and active investors, according to estimates from Egyptian investment bank EFG Hermes. 

The upgrade announcement was widely expected by the region’s investment community, following a similar emerging markets upgrade announcement by fellow index provider FTSE Russell in March. 

“MSCI index inclusion will be a historic milestone for the Saudi market as it will allow for sticky institutional money to make an entry in 2019 which will help deepen the market,” said John Sfakianakis, director of economic research at the Gulf Research Center in Riyadh.