Detailed amendments of short selling, securities lending regulations

Detailed amendments of short selling, securities lending regulations

Short Selling

Definition

A short selling transaction means any sale of a borrowed listed security in accordance with the SBL regulations.

Key Conditions

A person must not enter into as seller, and an exchange member must not execute as an agent or principal, a short selling transaction in respect of a listed security unless all of the following conditions are fulfilled:

- The seller is an eligible participant, and the short selling transaction is entered into in respect of eligible listed securities.

- The relevant security has been transferred to the seller's short selling account before executing the transaction.

- The selling price is higher than the best bid for this security.

Eligible Participants

Any person eligible to invest in the market may enter into a short selling transaction as a seller in accordance with the relevant regulations.

Eligible Listed Securities

Unless Tadawul specifies otherwise, a short selling transaction may be entered into in respect of all listed securities in accordance with the following regulations:

- The short ratio to average daily traded volume of the relevant security (total net short positions / average daily traded volume of the last 60 days) must not exceed 10 days.

- The total net short positions must not exceed 10% of the free floated securities of the relevant security.

- Tadawul shall publish a daily report for total net short positions after the trading day.

- Listed securities breaching regulations specified in paragraph (a) of Article (5), are not permitted for short selling in the next trading day, and Tadawul member will be responsible for verifying whether these securities were sold.

Reporting of short selling transactions

An exchange member who entered into a short selling transaction, either as an agent or principal must report complete and accurate details of such transactions in line with the relevant regulations.

Securities Borrowing and Lending Transactions

Definition

- An SBL transaction is a privately negotiated trade settled in the Depository Centre accounts.

Key Conditions

- A lender temporarily transfers ownership of listed securities to a borrower.

- The borrower commits to return equivalent listed securities as specified by the Depository Centre.

- In relation to the borrower, the SBL transaction is entered into for one of the following purposes:

- Executing a short selling transaction pursuant to the relevant regulations;

- Relending securities to the clients of the broker, custody member, or the qualified foreign investor;

- Settlement of default;

- Return of borrowed securities;

- Issuing units of exchange traded funds;

- Other purposes approved by the Depository Centre.

Eligible Participants

Only qualified investors are allowed to enter into an SBL transaction.

- A non-qualified investor may enter into an SBL transaction as a lender or as a borrower provided that:

- In case of entering the transaction as a lending party, where it should appoint a lending agent.

- In case of entering the transaction as a borrowing party, where it shall borrow the securities as a client from its custody member or the broker.

Eligible Listed Securities

- An SBL transaction may only be entered into in respect of listed securities which the Depository Centre specifies, after notifying the Capital Market Authority (CMA).

Minimum Collateral

- A borrower entering into an SBL transaction shall provide and maintain financial collateral as specified in the SBL agreement.

- The value of collateral provided by the borrower shall not at all times be less than 100% of the current market value of the borrowed securities.