Saudi Derivatives Market
INTRODUCTION:
The launch of the Derivatives Market is one of the Financial Sector Development Program (FSDP) key initiatives under the Kingdom’s Vision 2030. This market enhances Saudi Exchange’s products offering and complements recent developments to the financial market infrastructure. Below you will find more information about the market characteristics. Additionally, we have provided some useful links that will direct you to more educational content.
What is the Derivatives Market?
How to Trade Single Stock Futures (SSFs)?
EXCHANGE TRADED INSTRUMENTS:
| OPENING DAYS | OPENING AUCTION | CONTINUOUS TRADING | CLOSING AUCTION | SETTLEMENT CYCLE | MINIMUM LOT | TRANSACTION COSTS* | SECURITY FORMAT |
|---|---|---|---|---|---|---|---|
| INDEX FUTURES | |||||||
| Sunday - Thursday | 09:00–09:30 | 09:30– 15:30 | LTP | T+0 | One contract | SAR 25 per contract | Electronic Form |
| SINGLE STOCK FUTURES | |||||||
| Sunday - Thursday | 09:00–09:30 | 09:30– 15:30 | LTP | T+0 | One contract | 2.5 Bps per transaction value | Electronic Form |
*Excludes brokerage fees
NEGOTIATED DEALS:
Negotiated Deals occur when both sellers and buyers determine the quantity and price of the Listed Derivatives Product contract involved in the transaction.
DERIVATIVES MARKET FEATURES
Opening Price:
Open of the market takes place by an auction for Futures Contracts. The auction shall be based on the bids and asks entered during the Opening Auction. The market will open and uncross on a variable basis between 09:30:00am and 09:30:30am every trading day.
Closing Price:
Last Traded Price
IntraDay:
Matching takes place based on price and time priority.
Daily settlement price :
The Daily Settlement Price of the Futures Contracts is calculated based on a methodology determined and disclosed by the Exchange in the Listed Derivatives Products Specifications
Theoretical Future Price calculation:
Where:
Spot - Spot/underlying price
r - interest rate
DivYield- Dividend yield
TTE - time to expiry in years
Final settlement price:
The Final Settlement Price of the Futures Contracts is calculated based on a formula determined and disclosed by the Exchange in the Listed Derivatives Products Specifications
Tick Sizes:
Minimum price fluctuation of the Futures Contract will be specified by the Exchange in the Listed Derivatives Products Specifications.
Order Types:
- Limit Order
- Market Order
Order Conditions:
- Fill or Kill (“FoK”)
- Fill and Kill (“FaK”)
- Hidden Quantity
Order Validity:
- The First Session
- Day
- Good till Cancelled (“GTC”)
- Good till Date (“GTD”)
Minimum Trade Size:
One Contract
Fluctuation Limits:
| DERIVATIVES MARKET | |
|---|---|
| Daily Upper Limit | +20% from previous day’s closing |
| Daily Lower Limit | -20% from previous day’s closing |
Derivatives Underlying :
| PRODUCT | UNDERLYING |
|---|---|
| MT30 Index Futures | MT30 (MSCI Tadawul 30) |
| Aramco Futures | Aramco |
| AlRajhi Futures | AlRajhi |
| Alinma Futures | Alinma Bank |
| SABIC Futures | SABIC |
| stc Futures | stc |
| Saudi Kayan Futures | Saudi Kayan |
| Saudi Electricity Futures | Saudi Electricity |
| Almarai Futures | Almarai |
| Maaden Futures | Maaden |
| SNB Futures | SNB |
Contract Months and Year Code:
Example of contract code would be: (Product Code + Expiry Year + Expiry Month) (SF30 + 1 + F )
| MONTH | MONTH CODE |
|---|---|
| January | F |
| February | G |
| March | H |
| April | J |
| May | K |
| June | M |
| July | N |
| August | Q |
| September | U |
| October | V |
| November | X |
| December | Z |
| YEAR | YEAR CODE |
|---|---|
| 2022 | 2 |
| 2023 | 3 |
| 2024 | 4 |
| 2025 | 5 |
| 2026 | 6 |
Corporate action codes:
In case of corporate action, the long name of contracts post Corporate action will contain the below codes in the following sequence:
| # OF CORPORATE ACTION | CODE |
|---|---|
| First Corporate action | X |
| Second Corporate action | Y |
| Third Corporate action | Z |
| Forth Corporate action | Q |
| Fifth Corporate action | R |
ACCESSIBILITY BY MARKET PARTICIPANT
| ‘ONSHORE’ INVESTORS | |||||||
|---|---|---|---|---|---|---|---|
| ASSET CLASSES | SECONDARY MARKET ACCESS CHANNEL | VOTING RIGHTS | PUBLIC OFFERING PARTICIPATION | PRIVATE PLACEMENT PARTICIPATION | CAPITAL GAINS TAX/ZAKAT | WITH-HOLDING TAX | OTHER RESTRICTIONS |
| SAUDI INVESTORS | |||||||
| Derivatives | Direct Access | No | No | No | 0% | 0% | Not applicable |
| RESIDENT FOREIGN INVESTORS & GCC RESIDENT INVESTORS | |||||||
| Derivatives | Direct Access | No | No | No | 0% | 0% | |
| ‘OFFSHORE’ INVESTORS | |||||||
| NON-RESIDENT FOREIGN INVESTORS | |||||||
| Derivatives | Direct / Indirect | No | No | No | 0% | 0% | QFI Limits |
POST-TRADE FEATURES
| ITEM | DESCRIPTION |
|---|---|
| Clearing Members | General Clearing Member (GCM) and Direct Clearing Members (DCM) connected to Muqassa |
| Settlement Mode | Cash Settlement |
| Settlement Currency | All transactions are settled in Saudi Riyals. |
| Settlement Cycle | Contract are Marked to Market on a daily basis. |
| Margins | Initial Margin, Variation Margin, Add-on Margins. |
| Short Selling | Short selling is embedded in Derivatives market products. |
TRADING CYCLE AND TIMES
Trading Cycle:
Step 1: Buyers and sellers submit orders via the member where their accounts are maintained. This may be achieved through one of the channels provided by the member which includes, but not limited to, electronic trading platform. These orders represent the agreement between the member and the investor to execute a specific business transaction as per the investor order.
Step 2: Orders are entered into the member’s Order Management System (OMS). In accordance with market conditions and the requirement of the investor, the orders within the bank’s OMS are forwarded to the Saudi Exchange via a high-speed network.
Step 3: Saudi Exchange attempts to match orders according to price and time priority. A variety of order types and special terms are available to the trader. Unmatched orders are maintained in Saudi Exchange until they are matched, canceled or expire.
Step 4: For matched orders, trades are generated and reported electronically to Muqassa.
Step 5: The execution of the buy and sell orders that together form a trade; consists of one or more contracts and occurs when the same price is specified by buy and sells orders, for a specified number of contracts.
Trading Time:
Trading Days: One session, Sunday through Thursday except official holidays
| SESSION | TIME SCHEDULE FOR LISTED DERIVATIVES PRODUCTS (AS PER THE OFFICIAL TIME IN THE KINGDOM) |
|---|---|
| First Session: Pre-open (Opening Auction) | 09:00 – 09:30 |
| Second Session: Market Open - Trading | 9:30 – 15:30 |
| Third Session: Market Closed | 15:30 – 16:00 |
Official Holidays in the Kingdom of Saudi Arabia are:
- National Day of Saudi Arabia (23 September).
- Eid Al-Fitr and Eid Al-Adha.
- Founding day of Saudi Arabia (22 February)
Market will be closed during these holidays and announced on Saudi Exchange website
DERIVATIVES EXCHANGE MEMBERSHIP FEES
| SERVICE | FEES(SAR) | FREQUENCY |
|---|---|---|
| DERIVATIVES MEMBERSHIP FEES | ||
| Application fee | 30,000 | One time |
| Annual membership | 10,000 | Annual |
| OTHER DERIVATIVES MEMBERSHIP FEES | ||
| Trading Workstation Usage fees for new members per station | 11,700 | One time |
| Annual Trading Workstation Usage fees per station | 3,650 | Annual |
SETTLEMENT CYCLE (T+0)
What is meant by settlement of derivatives contracts?
To debit or credit on a daily basis a margin account based on the close of that day's trading session. The buyer and seller are then aware of the risk of their portfolios and margins, if any. Cash settlement takes place when buyers and sellers contracts are settled against the final settlement price by crediting and debiting their respective accounts with profit or loss.
A T+0 Settlement Cycle means that the Contracts are Marked to Market on a daily basis.
POSITION LIMITS
| PRODUCT | MARKET WIDE POSITION LIMIT (MWPL) | CLIENT POSITION LIMIT |
|---|---|---|
| Index Futures | NA | 10,000 contract |
| Single Stock Futures | 20% Open Interest of the Free float number of shares of the underlying security converted into equivalent number of contracts | 3% Open Interest of MWPL |