Saudi Arabia’s stock exchange will launch single-stock futures (SSFs) trading soon in an effort to boost liquidity on the market, the CEO of the Tadawul Mohammed Al-Rumaih told a local source, according to Arab News.
A SSF is a futures contract between two parties, where the buyer of the SSF, or the “long” side of the contract, promises to pay a specified price for 100 shares of a single stock at a predetermined future date (the delivery date). The seller, who is on the “short” side of the contract, promises to deliver the stock at the specified price on the delivery date, according to investopedia.com.
The SSF has been in use in the United States since 2002.
The introduction of SSFs into the Saudi stock market is just the latest in a series of reforms for the bourse, all in a bid to boost attractiveness of its capital markets and spur foreign investment.
A hot streak of IPOs is still underway in Saudi Arabia, with many oversubscribed.
