Nasdaq Dubai to launch Saudi equities futures this year

This year, Nasdaq Dubai plans to launch futures on selected firms listed on the Saudi bourse as it expands its futures offerings beyond UAE stocks for the first time, as part of plans to cater to the wider Middle East region.

The Saudi companies on which futures will be offered are some of the Middle East’s largest businesses active in sectors including petrochemicals, real estate, banking and transport, Nasdaq Dubai said in a statement on Monday without naming the listed equities.  The Saudi futures will begin trading on the bourse in the third quarter of 2018, it said without specifying the date.

“The futures will give investors new hedging tools to take long and short positions on the companies, at a time when international investor interest in the Saudi stock market is increasing rapidly,” according to the Nasdaq Dubai statement.

Tadawul, as the Saudi bourse is known, has risen more than 10 per cent since the beginning of this year, as investors actively seek exposure to the Arab World’s biggest equity market ahead of its possible inclusion in the MSCI Emerging Markets Index in June. Rival index compiler FTSE Russell in March announced that it will upgrade Saudi Arabia to emerging market status.

Another attraction for local, regional and international investors is the potential initial public offering of Saudi Aramco, the world’s biggest oil company. The highly-anticipated share float could yield as much as $100 billion in proceeds. The exchange with a total market capitalisation of more than 1.9 trillion Saudi riyals ($507 billion) has already seen its traded value climb to 399bn riyals this year, an 11 per cent rise over the same period in 2017.

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“The framework that we have built for trading and clearing Saudi futures is based on intensive consultations with regional and international market participants including brokers and potential investors,” said Hamed Ali, chief executive of Nasdaq Dubai. “Our futures will provide further impetus to investment into the Saudi capital markets and help develop new links with market participants.”

Futures contracts are agreements to buy or sell shares at an agreed price on a future date. The exchanges can launch and manage futures contracts for single stocks or on shares' indexes, both of which allow investors broader investment and hedging options.

Nasdaq Dubai launched UAE futures trading in September 2016 with single stock futures on seven UAE-listed companies. That number has since increased to 17 in February this year.

Last year, the bourse added futures linked to the Dubai Financial Market's benchmark share index as well as futures linked to the Abu Dhabi Securities Exchange's main gauge that are traded on Nasdaq Dubai's derivatives platform.

Nasdaq Dubai’s futures market currently operates with GCC brokerage firms as members, and two active market-makers on the UAE contracts. More are preparing to join as the exchange adds the Saudi single stock futures and expands its derivatives platform in phases, to include futures based on stocks and indices of various exchanges in the Middle East and North Africa region, the statement noted.