Edaa and Euroclear to launch new post trade link in Saudi Arabia

  • The linkage agreement with Euroclear was signed during the Future Investment Initiative (FII) conference
  • Saudi Arabia to be connected to Euroclear’s network in March 2022 
  • Euroclear’s network of international investors to access the Saudi Sukuk and Bonds Market via direct link
  • International investors will not need to apply for Qualified Foreign Investor (QFI) status

Riyadh, Saudi Arabia and Brussels: Saudi Arabia’s Securities Depository Center Company (Edaa) and Euroclear Bank, the Brussels based international central securities depository (ICSD), have signed an agreement at the Future Investment Initiative (FII) conference to launch a fully Euroclearable link to enable international investors access to the local sukuk and bond market.

The link, which is expected to be launched in March 2022, will provide an additional  channel for international investors to access the sukuk and bond market within the Saudi Exchange, the largest in the Gulf Cooperation Council (GCC) area among the largest stock exchanges globally and one of the top three largest emerging market exchanges with a market capitalization of more than US$2.5 trillion.

International investors will be able to settle domestically issued bonds via a direct nominee account in Edaa using their existing Euroclear accounts. This will follow Saudi Tadawul Group’s market infrastructure enhancements including an improved framework for both primary and secondary market delivery vs payment (DvP). The link, which will achieve greater interoperability within the market, is especially timely given the recent announcement of the Saudi Arabia inclusion to the FTSE Russell Emerging Markets Government Bond Index (EMGBI).

Euroclear’s eligible international investors will benefit from a suite of services including internal settlement, trade, and safe-keeping of Saudi government and quasi-government bonds listed on the Saudi Exchange, without the need to apply for a QFI status. Ultimately, eligible investors will also be able to use such Sukuk and Bonds as collateral for financing activities, including repo and pledging via Euroclear’s open Collateral Highway.

Raed Alhumaid, CEO of Edaa, said: “We are excited to partner with Euroclear, an International Central Securities Depository, which allows us to expand international reach to Saudi capital market, and in turn enhance the diversity of investors’ base in the market and increase its efficiency. Linking with International CSDs is one of Edaa’s milestones to the continuous efforts to advance the Saudi capital market and its infrastructure, in line with the Kingdom’s Vision 2030, as we aim to amplify our reach by creating more channels for international investors to efficiently access the Sukuk and Bonds market.”

Lieve Mostrey, CEO of Euroclear Group said: “We are extremely pleased to be able to bring the scale and robustness of our infrastructure to the Saudi capital market. By becoming Euroclearable, this G20 market will gain direct exposure to a wider international investor base, which will result in improved liquidity and cost efficiencies.  This achievement is the result of a lot of hard work and diligent focus by all involved as we continue to expand our global service for our clients.”

Over the past few years, the Saudi capital market has seen an increased demand from international investors for Saudi listed Sukuk and Bonds, as the market issuances grew to over SAR 451 billion, with the increased global demand on government issuances.

About Edaa:

The Securities Depository Center Company (“Edaa”) was established in 2016 and is fully owned by the Saudi Tadawul Group. “Edaa” operates and maintains the Depository and Settlement System (DSS) to record and maintain securities and register the ownership of securities on the Saudi Exchange. It aims to enhance the efficiency of securities deposit and registration services, in alignment with Saudi Vision 2030 objectives, through developing a more resourceful environment that fosters excellence within all sectors related to the capital market.

About Euroclear:

Euroclear group is the financial industry’s trusted provider of post trade services. Euroclear provides settlement and custody of domestic and cross-border securities for bonds, equities and derivatives to investment funds. Euroclear is a proven, resilient capital market infrastructure committed to delivering risk-mitigation, automation and efficiency at scale for its global client franchise.

The Euroclear group comprises Euroclear Bank, the International CSD, as well as Euroclear Belgium, Euroclear Finland, Euroclear France, Euroclear Nederland, Euroclear Sweden and Euroclear UK & International. The Euroclear group settled the equivalent of EUR 897 trillion in securities transactions in 2020, representing 276 million domestic and cross-border transactions, and held EUR 32.8 trillion in assets for clients by end 2020.