Saudi Arabia begins derivatives trading, MT30 Index futures debut today

The Saudi Stock Exchange (Tadawul) launches the derivatives market today, Aug. 30, 2020. The MT30 Index futures will be traded as the first exchange-traded derivatives product.

Derivatives will be traded in four sessions as follows:

The first exchange-traded derivatives product is an index futures contract, the Saudi Futures 30 (SF30), and is based on the MSCI Tadawul 30 Index (MT30). The contract size is SF30 multiplied by 100.

The contract months and years codes are set based on international practices as follows:

The maximum number of net long or net short positions to be held for all months has been set at 10,000. Qualified hedgers can hold positions beyond 10,000 contracts subject to the exchange approval upon submission of relevant documents of owning the underlying assets.

All institutional and corporate clients, individuals as well as individual DPMs can trade in the derivatives market by conducting a suitability assessment by participating members, as follows:

- 100% for corporate clients and individual DPMs: All institutional and corporate clients as well as individual DPMs. Individual DPMs are Saudi individual investment accounts in which the manager (Authorized Person) makes the buy/sell decisions for its client without referring to the account owner (based on to the agreed terms between them).

- 133% for Tier 1 individuals: Individual qualified client is a natural person who fulfills any of the following criteria:

-Conducted transactions not less than SAR 40 million and not less than 10 transactions in each quarter during last 12 months.

-Have an average portfolio size of SAR 5 million for the preceding 12 months.

-Worked for at least three years in financial sectors in a job related to securities’ investments.

-Holds General Securities Qualification Certificate which is recognized by the Capital Market Authority (CMA).

-Holds professional certificate that is related to securities business and accredited by an internationally recognized entity.

- 200% for Tier 2 Individual: Clients who are not under any of the other categories.

Following are the details of the MT30 Index Futures:

*Brokerage fees not included.

**Futures price = current price/underlying asset price x (average – dividend yield) x the remaining period until the contract expiration – diluted dividends x (average x the remaining period until the contract expiration).

It is noteworthy that the MT30, a joint tradeable index co-developed with MSCI Inc., targets the top 30 companies listed on Tadawul, which are the largest in terms of market value and the most active. The index applies a maximum limit on the weights of these companies.

The top 10 companies accounted for 70.63% of the index weight by the end of June 2020.

The MT30 index was calculated upon its launch in February 2019 on a base date of Nov. 26, 2013, with a base value of 1,000 points, in order to provide five years of historical data for users.

The index recorded its highest close at 1,392 points since its launch on May 2, 2019, while its lowest close was on March 16, 2020 at 815 points.

* Compared to the base.

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