ARAMCO IPO PUTS TADAWUL IN GLOBAL SPOTLIGHT

It is the moment Tadawul has been highly anticipating. Saudi Arabian Oil Company’s (Saudi Aramco) listing on the country’s stock exchange marks a significant new development in the capital market and will be a good test of the reforms that have been undertaken over the past few years.

“We are proud that Saudi Aramco has selected Tadawul as the venue for the intended listing of its shares,” said Eng. Khalid Al Hussan, CEO of Tadawul. “Tadawul and all its systems are ready to receive the largest listing in the history of financial markets, which will mark a major milestone in Tadawul’s journey and bolster our position among international stock exchanges.”

“The listing of Saudi Aramco’s shares is a major event for Tadawul and a significant milestone towards the realisation of Vision 2030. We will make every effort, alongside our partners in the Saudi Capital Market, to ensure this listing is a success and secures Tadawul’s position as a leading international stock exchange.”

Indeed, the Capital Market Authority (CMA) has been introducing a number of reforms to ensure foreign investors are comfortable and familiar with the regulatory framework as Tadawul implements best-in-class market rules and policies.

The efforts have paid off as the Saudi market has been included in global benchmark indices such as MSCI, FTSE Russell and S&P Dow Jones. And with an average weight of around 2.8%, Saudi Arabia was on MSCI’s watch list for less than a year before being included in the MSCI Emerging Markets Index – the shortest period any country has spent in the watch list in the index’s history, according to Tadawul.

The stock exchange notes that through the Qualified Foreign Investor (QFI) programme, international investors will have access to the Aramco offering. The QFI programme was introduced in June 2015 and has been amended as recently as January 2018 to ease registration requirements and expand the range of eligible institutional investors.

“Tadawul has worked closely with the Capital Market Authority to make the Saudi market attractive to international investors by improving market function and efficiency, expanding access, improving corporate governance and increasing transparency,” the stock market noted. “These far-reaching measures have enhanced liquidity, bolstered investor security, mitigated risk, reduced price volatility and brought market practices in line with international standards.”

A number of other regulatory reforms are under way to transform Tadawul into a world-class market hub with access to vast pools of domestic and foreign investments.

In October, CMA amended the laws to allow foreign companies to list on the Tadawul. Foreign companies will undergo the same listing, disclosure and governance requirements as Saudi-listed companies, and foreign shares will be traded on the exchange in Saudi riyals.

"Foreign listings on the Saudi market reflect the importance of integration between capital markets in the region. This will facilitate issuers’ access to new funding resources and enable investors to reach a diversified pool of investment tools”, said Khalid Al Hussan, CEO of Tadawul.

The Tadawul is also collaborating with like-minded exchanges such as the Abu Dhabi Stock Exchange (ADX) to promote cross-listing of securities in both markets. This is in line with the Saudi-Emirati Coordination Council’s efforts to boost co-operation between the two countries.

Earlier this year, ADX signed a memorandum of understanding (MoU) with Tadawul’s fully owned Securities Depository Centre Company (Edaa). The MoU facilitates the exchange of information and data relevant to transactions carried out by brokers, members, and investors, in addition to the processes of transferring securities and updating the securities ownership registers in relation to the cross-listing process.

CMA, Tadawul and the Debt Management Office (DMO) also unveiled a number of enhancements to the fees and commissions structure of the sukuk and bonds market in a joint effort to further develop the capital market.

According to the enhancements, fees and commissions will be restructured for sukuk and bonds’ services that will include new key changes in fees and commissions for issuers, members, and investors, as part of the Financial Sector Development Program (FSDP) outlined in the Saudi Vision 2030 initiative.

“Enhancing the effectiveness of debt instruments is key to achieving CMA’s strategy for advancing the capital market in line with the FSDP and Vision 2030,” Mohammed Al Kuwaiz, chairman of the CMA, said. “This restructuring of fees showcases this co-operation to stimulate development of the debt market and encourage sukuk and bonds issuance and trading.”