24 April 2017
Reporter: Stephanie Palmer

Saudi stock exchange makes move to T+2

Tadawul, the Saudi Arabian stock exchange, has officially moved to a T+2 settlement cycle for listed securities, from its previous T+0 system.

Effective from 23 April, the change means securities of all types and over-the-counter transactions will be settled within two days of the trade execution date.

In a statement, Tadawul announced that all the necessary pilot phases have been completed successfully, to “ensure full technical and functional readiness and connectivity with market participants”.

Tadawul first gained regulatory approval from the Capital Markets Authority of Saudi Arabia to amend the settlement cycle for listed securities in May 2016. The exchange then published draft rules for public consultation, and later released amended rules.

Amending the settlement cycle is intended to improve asset safety for investors, providing more time for trade verification, and for dealing with errors as and when they arise.

It will unify settlement duration for all types of listed securities, which currently vary, and will align the Saudi stock market with global settlement practices, opening up new opportunities among other market indices.

The move is also part of plans to develop an investment environment that better supports institutional investments, and to allow for securities lending and borrowing and short selling in the market.

The date of the move to a T+2 cycle was announced a month in advance, on 23 March. Ahead of the switch, trading was suspended for any listed securities that previously settled after two business days.

In place on 19 and 20 April, the suspension for these securities was to ensure there were no suspended transactions ahead of the T+2 implementation. Trading resumed on 23 April.

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