Saudi Arabia is set to implement stricter regulations on the use of borrowed funds for trading in foreign financial markets, a move aimed at enhancing protections around foreign investments.
CMA Rules
According to the Capital Market Authority (CMA), investors engaging with Saudi-regulated financial institutions to purchase foreign securities on margin will be required to finance at least half of the transaction value independently.
New Mandates
The proposed regulations will also mandate financial institutions to evaluate the suitability of certain overseas investments for clients and restrict margin financing related to highly leveraged products and shares in companies with accumulated losses exceeding half their capital.
These proposals are open for public consultation until 27 October, with the new framework anticipated to come into effect on 1 November.
Sico Bank noted that the measures primarily target high-risk, leveraged retail traders while also promoting improved risk management strategies in a client note.
Investment Firm’s Proposed Margin
The investment firm views the proposed 50% initial margin requirement as largely in line with standards observed in various global markets, suggesting a potentially positive impact for Saudi brokers.
The CMA also proposed rigorous rules for initial public offerings (IPOs) to enhance investor protection and market transparency. Institutional investors involved in the book-building process will need to demonstrate liquidity and the capability to fulfil IPO orders.
These underwriting agreements are expected to become effective prior to the initiation of book-building.
Recent data indicates that the value of IPOs in the Middle East and Africa dropped by 71% year-on-year, falling to approximately $2B during H1 of FY26, according to LSEG data.
This decline marks the lowest value since 2020, largely attributed to the Iran war.
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