Saudi CMA drafts 50% margin floor on foreign market trades

Summary

• CMA opened a 30-day consultation on rules for dealing in markets outside Saudi Arabia.
• Draft sets a 50% minimum margin and bars trades in heavily loss-making companies.
• Final provisions are set to take effect November 1, per the regulator.

The latest

A 50% minimum margin on client trades executed in foreign securities markets sits at the center of draft rules published by Saudi Arabia's Capital Market Authority. The regulator opened the text to public comment for 30 days, closing October 27, and said the provisions are due to take effect November 1. The draft targets how licensed capital market institutions handle clients abroad.

Details

• The scope: The draft covers dealing activities carried out by Saudi capital market institutions on behalf of clients in financial markets outside the Kingdom, according to the CMA. The regulator described the aim as strengthening the supervisory framework governing those cross-border client relationships rather than restricting access to foreign markets outright.
• The margin rule: For margin transactions on external markets, the draft requires the client to pay no less than 50% of the transaction value and obliges the institution to monitor that margin periodically. The CMA framed the controls as risk mitigation for a category of trading it identified as carrying elevated exposure.
• The prohibitions: The draft bars institutions from executing margin transactions on highly leveraged instruments, and on companies whose accumulated losses exceed half of their capital. The two exclusions apply to the foreign-market channel specifically, drawing a line around the securities clients may trade on borrowed funds.
• Suitability standard: Suitability requirements will apply to transactions concluded in foreign markets equivalent to the Main Market or the listed debt instruments market, as defined under the Capital Market Institutions Regulations. The institution must satisfy those requirements before it begins dealing with the client in those markets.
• The exemption: Once suitability is established, the institution is not required to reassess it at each subsequent transaction. Reassessment is triggered only by a material change in the client's information or circumstances that warrants reconsideration, under the draft's wording.
• The timetable: The consultation runs 30 days and ends October 27, with the final version scheduled to come into force November 1. That leaves a narrow window between the close of comments and the effective date for the CMA to process feedback and issue the approved text.
• The channel: Comments are received through Istitlaa, the unified electronic platform for consulting the public and government entities, affiliated with the Saudi Competitiveness and Business Center. The CMA said submissions will be taken into full consideration in approving the final provisions.
• What is unstated: The regulator did not publish the number of institutions or client accounts affected, nor any estimate of the volume of Saudi client trading currently executed abroad. No transition period for existing margin positions was set out alongside the November 1 date.

Background

Capital market institutions in Saudi Arabia are licensed by the CMA and already operate under the Capital Market Institutions Regulations, which set suitability and conduct standards for client dealing. The draft extends parts of that framework to activity executed on exchanges outside the Kingdom.

Between the lines

The three controls grouped together — a 50% margin floor, periodic monitoring, and a ban on highly leveraged instruments and deeply loss-making companies — all sit on the credit side of foreign trading rather than access itself. Read alongside the suitability exemption for subsequent transactions, the draft tightens borrowing while leaving routine cross-border execution largely unimpeded.

What's next

The comment window closes October 27. Watch for the CMA's approved final text and whether the 50% margin threshold survives feedback intact before the November 1 effective date.

Source: Saudi Gazette / Zawya