Saudi Stock Exchange Tadawul opens up short-selling to all investors

By Rahul Vaimal, Associate Editor
  • Follow author on
Tadawul Saudi Arabia's Stock Exchange
Representational Image

Saudi Arabia’s national stock exchange, Tadawul has opened up short-selling and stock-lending options further to all eligible investors in the Kingdom. 

The new provisions came into effect on March 25, permitting all qualified investors to sell any stock short. The bourse has also altered the existing framework to tighten other rules related to the activities.

The reframed rules stipulate that the short ratio to the average daily traded volume of any security should not exceed 10 days and total net short positions must not exceed 10 percent of the free float.

Few changes have also been made to collateral rules for those lending and borrowing securities.

In a statement made to the media, Tadawul stated that these changes are in line with the bourse’s ambitions to develop a regulatory environment that is consistent with the international best practices while providing a “motivating and competitive atmosphere with high reliability.”

The kingdom’s stock exchange was the first in the Gulf region to introduce short selling for institutional investors on its platform in an effort to attract international investors and appeal to index providers such as MSCI Inc.

Once Tadawul introduced the short-selling option in April 2017, Abu Dhabi and Dubai soon followed suit by offering the service on their respective platforms in October and December of that year, respectively.

MSCI upgraded Saudi Arabia from a “standalone market” to an “emerging market” in June 2018. The kingdom also became a full member of the MSCI Emerging Markets Index in August 2019 with a weighting of 2.8 percent.

Earlier, Tadawul and the Securities Depository Center, Edaa, had launched a deliberation on the latest changes in February 2020.

Related: Saudi PIF transfers food and agro project stakes to SALIC