Clearstream opened up the Saudi capital market to international investors on Monday through a new connection with the Saudi securities registry, Edaa.
The post-trade services provider is the first international central securities depository (ICSD) to offer investors access to the Saudi Exchange.
It is using an ICSD link with the Securities Depository Center Company, known as Edaa, the company responsible for operating and maintaining the Depository and Settlement System (DSS), which recently acquired ICSD regulatory approval from the Saudi Capital Market Authority (CMA).
International investors now have seamless access to the Saudi capital market by enabling settlement of Saudi Exchange-listed government bonds, non-convertible corporate bonds and ETFs denominated in Saudi Riyal (SAR).
They also do not need Qualified Foreign Investor (QFI) status and will be eligible to hold Saudi fixed-income securities and ETFs via a foreign nominee omnibus account structure, benefitting from the usual suite of ICSD services, including offshore (internal) settlement.
Clearstream expects an increase in demand for Saudi government bonds from cross-border investors, improving liquidity in the domestic market and satisfying an already substantial appetite from foreign investors for Saudi listed sukuks — Islamic-sanctioned bonds — and corporate bonds, as market issuance grew to over $106 billion in Q1 2021.
The Saudi Exchange is among the largest 10 stock exchanges globally and one of the top three largest emerging market exchanges with a market capitalisation of more than $2.5 trillion.
The linkage forms part of the CMA’s strategy to develop a consistent regulatory environment in alignment with international best practices and the nation’s Saudi Vision 2030 objectives, supporting the development of the Saudi capital market and sustaining Saudi Arabia’s competitiveness ranking among its G20 peers.
Clearstream’s head of global markets Jan Willems says: “Adding the Saudi market to our network is a further token of Clearstream’s commitment to support emerging capital markets in their integration into the global financial system, creating further investment opportunities backed by our trusted, high-quality service offering.”
Edaa CEO Raed Alhumaid says: “We are keen to partner with a leading post-trade services provider as we seek to create strong links with global depositary centres to introduce advanced services for market participants.
“The linkage with International Central Securities Depository Clearstream reflects our efforts to facilitate the access of international investors to the Saudi capital market, while strengthening bridges between local issuers and foreign investors, especially in regards to debt instruments listed on the Saudi Exchange. This is in line with the objectives of the Financial Sector Development Program, part of Vision 2030.”
In March, Saudi Arabia finalised amendments to its securities lending and short selling rules to better align standards with international best practices and completed its first securities lending transaction, as part of a concerted effort by the country’s regulators to kickstart an active financing market.
