Creation of independent clearinghouse will pave the way for derivatives trading and other new asset classes
The Saudi Stock Exchange (Tadawul) announced today the establishment of the Central Counterparty Clearing House (“CCP”) for clearing of securities in the Saudi capital market as a closed joint stock company with a capital of (SAR 600,000,000). The CCP will be responsible for developing future clearing in accordance with the best international risk management practices and standards. The Capital Market Authority (CMA), Saudi Arabian Monetary Authority (SAMA) and Tadawul have already initiated the required regulatory regime to activate the CCP function, in order to enable it to fully operate by the second half of 2019.
An independent clearinghouse will help to diversify investment opportunities in the market by enabling the introduction of new asset classes such as derivatives and others that will allow investors to diversify their trading strategies and enable Saudi companies to hedge against risks, which will enhance the attractiveness of the Saudi capital market to all investors.
In addition, CCP will improve risk management of the market by introducing new mechanisms to ensure that the settlement is complete and that all parties meet their obligations when settling trades in the market. This will further strengthen the current market infrastructure, reduce systemic risk and increase market efficiency.
“Establishment of the CCP will facilitate the further growth and product expansion of the capital market by enhancing the post-trade infrastructure to reduce risk, enhance financial stability, and attract investment into the Saudi capital market in alignment with international standards and Vision 2030,” said Eng Khalid Al Hussan, CEO of Tadawul and Chairman of the Board of Directors of CCP.
TheCCP Board of Directors has appointed Mr. Wael Abdullah Al Hazzani as CCP CEO, Mr. Al Hazzani has led several functions and a number of key projects and programs within Tadawul.
For additional information on the CCP, please click here.