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Saudi stock exchange to shift to T+2 trading settlement cycle

Visitors at Tadawul, the Saudi Arabian exchange, watch stock movements on giant video screens.

The Saudi stock exchange will move to a two-day settlement cycle for listed securities, and will also introduce short selling, both effective April 23.

The exchange, known as Tadawul, said in a notice on its website that it had approved a set of rules related to the trading of securities in the market, in an effort to develop the country's capital market.

The exchange currently settles transactions on a so-called T+0 cycle, with execution and settlement happening on the same day. Tadawul will move to a T+2 cycle for listed securities.

The approval follows the completion of “all necessary pilot phases to ensure full technical and functional readiness and connectivity with market participants,” the notice said.

“Amending the (cycle) will increase the level of asset safety for investors by providing enough time to verify trades and will unify the settlement duration for all types of listed securities,” the notice said.

It said the move will have no impact on traders but gives sellers “purchasing power” for the securities they sell, enabling them to buy new securities directly upon executing trades. At the same time, buyers will be able to sell securities directly upon executing trades, without having to wait for the completion of settlement.

Tadawul announced on May 3, 2016, it was seeking regulatory approval by the Capital Market Authority to amend the settlement cycle. The move is in line with the stock exchange's strategy to support the development of the capital market in Saudi Arabia, and its “Vision 2030,” which calls for the building of a more advanced capital market open to the world, the notice added.

A separate document explaining the move said the increased settlement cycle will align the Saudi stock market with leading global settlement practices, “as this will open up new listing opportunities for the Saudi market among other global markets indices.” It will also help to develop an environment promoting institutional-level investments.