Tadawul CEO
(Mohammed Al-Rumaih, CEO of Saudi Exchange Tadawul)

Tadawul launches single stock futures in July

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The Tadawul, Saudi Arabia’s stock exchange, will allow single-stock futures trading on selected shares from the 4th of July 2022, in a move to bolster liquidity and lure local and international investors into the region’s biggest bourse.

A single stock future (SSF) is a futures contract between two parties. The buyer of the SSF promises to pay a specified price for 100 shares of a single stock at a predetermined future date. The seller promises to deliver the stock at the specified price on the delivery date.

The first tranche of the futures contracts will include some of the largest and most liquid companies listed on the Saudi Exchange: Al Rajhi Bank, Saudi Aramco, Saudi National Bank, Alinma Bank, SABIC, Saudi Kayan, Saudi Telecom Co., Saudi Electricity Co., Almarai, and Ma’aden.

The stocks are selected based on a list of criteria that aims to ensure liquidity to meet market demand, maintain market integrity, and enable effective portfolio management, trading and hedging opportunities, the bourse said. SSFs contracts will be cleared and settled by Securities Clearing Center Company “Muqassa” in line with international best practices.

Speaking on the occasion, Mohammed Al-Rumaih, CEO of Saudi Exchange stated: “We are excited to introduce the second derivatives product to the Saudi Exchange, as we continue to deliver on our commitment to providing a sophisticated and innovative range of products and services to local and international investors. The launch of the SSFs contracts further supports the advancement of the Saudi Capital Market by creating diversified offerings, complemented by hedging tools to manage risk and limit losses in adverse market conditions.”

The Saudi Exchange launched the Derivatives Market in 2020, and is looking to introduce additional derivatives products such as Single Stock Options in the near future.

Towards the end of last year, the Abu Dhabi Securities Exchange also introduced a derivatives market.
The Saudi bourse is also expected to see 36 new listings by the end of the third quarter of 2022, Asharq News reported citing Al-Rumaih. The executive added that 10 new companies have been approved for listing on the Tadawul.

With the latest initial public offering of Saudi developer Retal Urban Development Co., Tadawul has recorded 27 listings so far this year, the CEO concluded.

Saudi authorities have introduced a raft of reforms as part of initiatives to attract international share buyers and and diversify the oil-dependent economy.