Saudi Arabia shifts to two-day settlement cycle

The long-awaited shift to a two-day settlement cycle in Saudi Arabia comes into effect today, April 23.

The change will bring the Saudi stock exchange, the Tadawul, in line with international norms. Formerly, Saudi Arabia operated a system in which equities were required to settle the same day they were traded.

“It is vitally important that Tadawul’s market participants, both domestic and foreign, have access to a transparent and exceptional trade environment that conforms to the highest international standards,” said Khalid Abdullah Al Hussan, chief executive of the Tadawul, in a statement released earlier this month.

The change in settlement cycle comes in advance of the highly anticipated initial public offering (IPO) of Saudi Aramco, the country’s national oil company. Aramco is expected to jointly list on the Tadawul and at least one other international exchange.

Earlier this month, the Tadawul outlined several other reforms designed to meet international standards. These included new corporate governance rules, adoption of the Global Industry Classification Standard, the introduction of a parallel equity market for qualified investors and a delivery-versus-payment model. Many of these reforms have either come into effect already or will be implemented by the end of June, said the exchange.

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