Tadawul best-placed among peers to introduce derivatives: CEO

The Saudi Stock Exchange (Tadawul) is best-placed among peers to introduce exchange-traded derivatives, given the weight of the companies listed and the available liquidity, chief executive Khalid Al Hussan told Argaam.

Several reforms undertaken by the bourse to align it with international standards have also made the market more appealing for foreign investors, Al Hussan said.

“Index futures contracts are the first derivative product to be launched in the local market,” said Al Hussan, expressing optimism about the market size in the early stages.

The futures, which will be launched in the first phase, will be listedd on the index as a whole, and not on individual companies. Their performance will be linked to that of the index, while their value would hinge on supply and demand from investors.

The Saudi bourse will soon announce the companies that will be included in the futures contracts market. This will take place before launching the joint tradeable index with the MSCI in the fourth quarter of 2018.

“Tadawul is currently developing regulatory criteria for the first product,” Al Hussan said.

He added that Tadawul may change the fluctuation limit of stocks if necessary, in line with market conditions.

The Saudi bourse this week signed an agreement with global index provider MSCI to jointly launch a tradeable index later this year in a move that could spur the growth of derivatives and exchange-traded funds in Saudi Arabia.

 The stock index futures will be followed by several other exchange-traded products, Al Hussan said.

In a statement on Tuesday, Tadawul said it would introduce exchange-traded derivatives in the first half of 2019

“The launch of a derivatives market is the natural next step towards an advanced capital market. Derivatives enable efficient price discovery of our securities in the home market,” Al Hussan said in the statement.