Tadawul diversifies investment opportunities by rolling out single stock options

Logo of Saudi Exchange (Tadawul)

The Saudi Exchange (Tadawul) is gearing up for the rollout of its newest exchange-traded derivatives product — the single stock options (SSOs), which will be introduced to the Saudi capital market through the core assets of four listed companies in the first phase, starting Nov. 27, with an eye to add more stocks in the future, as confirmed in previous statements by a Tadawul official to Argaam.

The new product is part of a series of developments undertaken by the Saudi Tadawul Group Holding Co. (Tadawul Group). This reflects its ongoing commitment to achieve the ambition of the Saudi Vision 2030’s Financial Sector Development Program (FSDP) to build a solid, diversified financial sector, creating a developed and advanced Saudi capital market that attracts local and international investors.

The Saudi capital market ranked the ninth largest exchange in the world in terms of market capitalization by the end of last September.

The history of Tadawul Group is closely linked to the development of the Saudi capital market and the transformation of its technicalities. The company took part in the establishment of the infrastructure for securities transactions, with information technology (IT) being a cornerstone. It worked to develop advanced information systems and improve trading, settlement and clearing platforms and related services.

The Derivatives Market, launched by Tadawul in 2020, is one of the FSDP’s key initiatives, with central counterparty clearing via the then-introduced clearinghouse, the Securities Clearing Center Co. (Muqassa). The latter is working to develop new mechanisms to guarantee the trades and provide clearing services for exchange-traded derivatives as part of improving risk management in the market and its operational efficiency.

Exchange-traded derivatives are used by local and international investors, individuals and institutions to diversify their investment portfolios and hedge against possible stock pullbacks. They also offer more opportunities to tap the Saudi capital market.

On Aug. 30, 2020, Tadawul launched the first exchange-traded derivatives product — MT30 Index Futures, an index futures contract based on the MSCI Tadawul 30 Index (MT30), marking the beginning of derivatives trading in the Kingdom. The table below indicates all derivatives products in the Saudi capital market:

SSOs, scheduled to launch next week, are defined as contracts that give the holder the right, but not the obligation, to buy or sell an underlying asset by a certain date at a predetermined price.