Saudi derivatives trading tops SAR1bn after market overhaul

The Saudi Exchange's derivatives market has surpassed SAR1 billion (£199 million) in traded value and 24,000 futures contracts following a series of changes introduced in August according to Christopher Jenkins, chief of derivatives at the exchange, said on Thursday.

“A significant milestone for Saudi derivatives this week,” Jenkins said in a LinkedIn post. “When we began this next phase of developing these markets, the objective was not simply to increase volumes, but to build the foundations for a deeper, more liquid and more accessible derivatives ecosystem.”

He added: “Surpassing SAR 1 billion in traded value and 24k futures contracts is an encouraging early milestone and a strong indication of the progress being made.

“Still plenty more to do as we continue to build participation, expand liquidity and develop the market further, however great to see the momentum building.”

Saudi Exchange targets deeper derivatives liquidity

The milestone comes after Saudi Exchange and Securities Clearing Center Company (Muqassa) last month introduced changes covering its MT30 Index Futures and Single Stock Futures, including a strengthened market-making framework, lower transaction fees and changes to margin and product specifications.

In an August interview with FOW, Jenkins said the changes were designed to establish a stronger liquidity base for domestic and international investors after activity in the products had previously been limited.

“It’s been a great response with over 6000 contracts and SAR270 million (£43 million) notional traded since launching five days ago,” Jenkins told FOW at the time.

“Previously, these products weren’t trading and the liquidity just wasn’t there which is why we’ve gone through with the enhancements to ensure that there is a solid base to grow our derivatives market for domestic and international investors.”

Liquidity builds after structural changes

The latest figures represent a sharp increase from the activity recorded five days after the August 19 changes, when more than 6,000 contracts representing SAR270 million in notional value had traded.

“The key is for liquidity to build on liquidity,” Jenkins said.

The August overhaul included a 70% reduction in fees alongside waivers on transaction and clearing charges, while Saudi Exchange signed agreements with SNB Capital on behalf of several derivatives market makers to support liquidity provision.

Jenkins said interest had come from domestic and international participants across institutional investors and proprietary trading firms.

“We want to ensure that the new market offers opportunities for domestic and international participants and we’re able to do that through the support of our market makers,” he said.

Changes to single stock futures included an increased tick value, removal of the margin multiplier and a revised daily settlement price methodology. Margin levels were also reviewed, with enhanced netting made available across maturities and futures products to improve capital efficiency.

FIS connectivity was introduced to support trading and clearing of exchange-traded derivatives, providing real-time visibility of transactions, collateral positions and margin monitoring.

“The key is to ensure sustained growth through enhancements across the ecosystem, from the front to back end,” Jenkins said.

Further expansion of the Saudi derivatives market is planned, with the exchange looking to make similar enhancements for additional Single Stock Futures and its planned Single Stock Options.

“The initial phase of enhancements is just the beginning but is critical,” Jenkins said. “We’ll follow the same path for the next five single stock futures as well as single stock options which is expected to launch in the near future.

“We won’t rule out additional instruments and products for more asset classes that are in line with market demand but our focus is to be successful with the products that we already have first.”

This comes as Fastmarkets in July launched three regional ferrous scrap price indices for Saudi Arabia, expanding local benchmark coverage as investment in the Kingdom’s steel industry drives demand for more granular pricing.