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Saudi Arabia mulls 60% increase in trading fees before Tadawul’s IPO

The deliberations may have been made to compensate for revenues due to falling volumes

Image Credit: Reuters
The Saudi Stock Exchange in Riyadh. On May 5, the bourse said it has appointed HSBC Saudi Arabia as the financial adviser to the IPO, which is expected to take place in 2018.
Gulf News

Dubai: Saudi Arabia may charge 60 per cent extra trading fees from investors trading on the Tadawul bourse, which is readying for an initial public offering (IPO), Bloomberg reported, quoting two sources.

The Capital Markets Regulator (CMA) may increase the trading cost to 0.025 per cent from the current 0.018 per cent. The new fees, which are split equally between the regulator and the exchange, could be introduced later this year, the Bloomberg report said.

The CMA confirmed in a statement to Bloomberg that it is contemplating a fee increase, but didn’t divulge more details. “The CMA is considering a change to the trading fee structure and will make the necessary announcement as and when the CMA’s board makes its decision,” it added.

Officials at the Tadawul exchange remained unavailable for a comment.

The deliberations have been made ahead of a possible IPO of the stock markets operator, analysts said. “They want to do that (increase trading fees) before the IPO to sell to the market a better business plan for the bourse because bulk of the revenues are generated through these fees,” Sebastien Henin, head of asset management at The National Investor told Gulf News.

Volumes have declined significantly since last year. Turnover on Saudi’s bourse has fallen 25 per cent to be at $1.5 billion per day. “Since volumes have decreased, for them it makes sense to compensate the impact of falling volumes on revenues,” Henin said.

Saudi Arabia’s $400 billion stock market is the largest in the Gulf. On May 5, the bourse said it has appointed HSBC Saudi Arabia as the financial adviser to the IPO, which is expected to take place in 2018.

Wider perspective:

“I think we should look at the recent changes by CMA in its wider perspective and not to focus simply on the potential changes in trading fees,” Karim Nsouli, Executive Director at Arqaam Capital told Gulf News.

The CMA announced reforms to attract more foreign capital. The regulator is expected to allow foreign investors to hold a 10 per cent stake compared to previous 5 per cent, and have also lowered the limit of the total corpus for Qualified Institutional Investors to 3.75 billion Saudi riyals from the earlier 18.5 billion Saudi Riyals.

“We believe the recent changes are a positive development. Easing restrictions on foreign investors will put Saudi Arabia at the front line for MSCI inclusion, as an emerging market player,” Nsouli said.