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Abu Dhabi, UAESaturday 23 June 2018

Tadawul, Nasdaq in technology partnership to open up exchange for new asset classes

Region's largest equity market is undertaking reforms

The value of IPOs in the third quarter rose 20 per cent to US$236.7 million from a year-earlier period, led by 3 offerings on the Saudi Stock Exchange or Tadawul, EY said. FAYEZ NURELDINE/AFP
The value of IPOs in the third quarter rose 20 per cent to US$236.7 million from a year-earlier period, led by 3 offerings on the Saudi Stock Exchange or Tadawul, EY said. FAYEZ NURELDINE/AFP

The Saudi stock exchange, better known as Tadawul, has partnered with New York-based Nasdaq to introduce a new post-trade technology that will allow for trading in new asset classes as part of its ongoing reform process.

The new technology will replace Tadawul’s current registry, depository, clearing and settlement solution that dates back to 2001, Nasdaq said in a statement.

The American exchange said it would continue supporting existing trading and market surveillance technology at Tadawul.

“By addressing the demand to overhaul, modernise and evolve its post-trade infrastructure, this demonstrates a clear vision by Tadawul to attract capital — both domestic and foreign — and present Riyadh as a major financial destination with best-in-class technology operating at its core,” said Adena Friedman, president and chief executive at Nasdaq.

Tadawul, the Arab region's biggest bourse with a market capitalisation of around US$440 billion, has been undertaking reforms to woo foreign investors. The exchange also is eyeing inclusion in the widely-tracked MSCI Emerging Market index as well as FTSE's EM index.

The exchange is also preparing for the listing of a five per cent stake in Saudi Aramco which is slated for next year, which could fetch as much as $200bn.

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In an interview with The National in October Tadawul chief executive Khalid al-Hussan said that he expected the Aramco floatation to boost the market capitalisation of the stock exchange to over $1 trillion.

Tadawul took the markets by surprise two years ago after announcing it would lift restrictions on allowing foreign ownership of its stocks. However, foreign entities have been rather slow in their uptake of Saudi stocks as the region’s business environment grew lukewarm after the slump in oil prices.

The Saudi exchange, which has targetted joining the MSCI emerging markets index club by 2019, has plans to introduce equity futures and options in two years.