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The Saudi stock market on the list of follow-up to the Emerging Markets Index


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What is the "settlement T + system 2" for the purpose of its application in the Saudi bourse?

ECONOMY
Last updated on Monday, April 24, 2017; 12:00 (GMT +0400).
 
 
What is the

Dubai, United Arab Emirates (CNN) - Saudi Stock Exchange began "trading", Sunday, modify the length of time for the settlement of transactions, to move the Saudi bourse from work to "settlement T + system 0", to the "settlement system T + 2".

But what is this system and what the purpose of the amendment?

 

It is intended to settle the financial paper: Security executing transactions from the investment portfolio for the seller to the investment portfolio of the buyer transfer, as intended cash settlement of the transfer of the securities carried the price of transactions from the investment account for the buyer to the investment account to the seller of the market members, according to the "trading", the largest bourse in the Middle East, and the only entity authorized to operate as a market for securities in the Kingdom of Saudi Arabia.

 

The "trading" applied the settlement T system 0 + which provides for the settlement of transactions in the same day, which could be an obstacle to investors who do not have in possession of large sums of money before trading, but the new system "T + 2" requires that the period of time between the implementation of the deal and the registration of securities and the actual payment of the transaction value is estimated transfer of ownership Bayoumi work, in line with international standards and requirements of the Saudi market inclusion within the emerging markets index.

The aim of "trading", which is a capital of 1.2 billion Saudi riyals, the application of "settlement system T + 2" to:

  • Raise the protection of investors' assets and allow the field level to verify the validity of the deal and deal with errors if any.
  • Align the Saudi financial market with the applicable international standards in other markets with regard to the settlement procedures, which increases the Saudi market to include opportunities within the global market indices.
  • The development of the investment environment to stimulate institutional investment, taking into account the requirements to adapt to future changes.
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Saudi Stock Exchange confirmed «trading» the success of the application of the time period for the settlement of listed securities transactions for two working days (T + 2), after completing the first yesterday the settlement of transactions carried out last Sunday, according to a statement released by the company yesterday indicated it that the application came in line with the settlement mechanisms applied in the majority of the global financial markets, and after the completion of all phases of technical readiness and technical experimental systems and linking them with all members of the market.

The executive director of trading. Khaled horse: There is no doubt that the transition to the new settlement mechanism will happen to a quantum leap in the Saudi financial market classification within the global financial markets, thus enhancing the liquidity of the market and the level of efficiency and transparency, thus leading to an influx of more foreign direct investment.

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The Saudi stock market towards global growth
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Abu Dhabi - Sky News Arabia

Saudi Capital Market Authority said that the market put on a list of follow-up to the Index MSCI (MSCI) Emerging Markets, is the first step to join the Saudi stock market index completely.

He was quoted by the Saudi Press Agency Deputy Chairman of the Capital Market Authority Mohammed bin Abdullah Gwaiz, that this step represents a quantum leap in the domestic financial market and consistent with the strategic direction of the body so as to achieve the objectives of the Kingdom's Vision 2030 aims to Saudi financial market development and transfer to the ranks of the world markets.

And it worked the body with the Saudi Stock Exchange trading and market participants to ensure the achievement of several initiatives, including the Organization rules issued for the investment of foreign institutions eligible in the securities listed in the Saudi market, and the approval of the separation of the depository for "trading" company and turn it into an independent company.

In addition to modifying the length of time for the settlement of securities listed on the immediate settlement of transactions (T + 0) to the settlement after two working days (T + 2), in addition to activating the short sale conditional borrowing stock, and the establishment of a parallel market (growth) and the launch of a variety of financial products such as Real Estate investment traded funds (REITs).

With respect to listed companies, the Commission has taken towards its quest to join the global application of indicators of global best practices, such as switching to the application of International Accounting Standards (IFRS) earlier this year 2017 and an amendment to the regulation of corporate governance.

In addition to the inclusion of the Saudi financial market on the list of follow-up Index (MSCI) Emerging Markets, as well as the Saudi financial market is currently present on the list of follow-up to the FTSE (FTSE) for emerging markets.

The list continues to follow-up is usually a period of time visuals survey of institutional investors on the Saudi financial market and legislation and procedures applicable where, during which the final approval before joining the index, note that the full integration of the index usually takes a decision to join.

The Capital Market Authority reported that in the event of accession to international indicators, including the Index (MSCI) Emerging Markets, which is after the end of the follow-up period, will involve him several benefits including support for market stability and reduce volatility by strengthening institutional investment, increasing the financial market efficiency.

It showed that joining enhances the attractiveness and liquidity of the market where makes Saudi stock market up a large segment of investors in various countries around the world who are targeting investment in emerging markets, where depends a lot of investment funds, global investment institutions on global indicators for investment by allocating a portion of their investments to the Saudi market based on the weight of those indicators.

According to the Commission, it is among the expected benefits of joining: raising the level of disclosure of listed companies and activating the role of investor relations as a result of high institutional investors contribution, raising research and studies the level of the listed supporting investors in making their investment decisions companies, in addition to supporting the performance of the persons authorized to securities dealings increasing customer base and activate the role of the largest providers of conservation service.

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