The Saudi stock exchange, the Tadawul, is making changes to the trading of small and medium-sized companies just before the country’s inclusion in major emerging-market benchmarks, which it is hoped will further boost the exchange.
The Tadawul is to increase the number of listed firms in the small and medium-sized company segment and improve liquidity in trading, according to a statement. The reforms being adopted by the $530 bn bourse aim to align the Tadawul with international markets and open it up to foreign investors.
Last year FTSE Russell and MSCI announced the inclusion of Saudi Arabia in their emerging-market benchmarks, with the upgrade happening over a period of time that starts next month, followed by the inclusion in the MSCI Emerging Market Index in May. Investors and analysts expect billions of dollars of inflows as a result.
The changes are planned to be implemented in two phases, the first in Q1 2019 and the second in Q2 2019.
Changes in the first phase include:
– Provisions to allow direct listings on the Nomu Parallel Market without an IPO
– Requirements for issuers to report financial earnings on a semi-annual basis instead of quarterly
– Streamlining the process for issuers to transition from the parallel market to the main market
– Establishing access mechanisms by applying a minimum liquidity threshold
– Reducing the normal trade threshold
– Introducing a Nomu Capped Index.
The changes to be rolled out in the second phase include listing closed-ended funds and real estate investment trusts on Nomu, and introducing volatility guards and independent research.
Khalid Al Hussan, CEO of Tadawul, says in a statement: ‘These initiatives are part of our ongoing strategic plans to further develop Nomu Parallel Market. We are constantly working on making Nomu a more flexible [and] attractive platform for both investors and potential companies. Throughout the past two years, we have been carefully analyzing the market and taking into consideration the needs of market participants.’
