(Aug 26): Saudi Arabia is stepping up efforts to deepen its capital markets, making it cheaper and easier to trade derivatives as it seeks to attract more investors and trading firms.

The Saudi Exchange and clearing house Muqassa have lowered fees for futures tied to an index tracking the 30 largest and most actively traded firms in the kingdom. The changes, which took effect Aug 19, include a waiver of futures transaction and settlement fees for a year as well as revised margin requirements, the firms said on Wednesday.

The measures are likely geared towards boosting activity in a relatively young market for derivatives trading.

Lower fees will reduce costs for traders while strengthened market-making obligations will provide more consistent pricing and liquidity. A more active futures market will hand investors additional tools to hedge positions and manage risk, potentially making the broader market more attractive to institutions.

Local officials have courted international investors and sophisticated trading firms in recent years, while upgrading infrastructure to better support them. The latest steps will potentially give investors a wider range of products to trade, while addressing a key hurdle: liquidity.

The moves come on the back of significant changes already underway.

In February, Saudi Arabia opened direct stock trading to all foreign investors, though momentum stalled, with the regional conflict adding pressure on the market. But the appointment of a new head at the capital markets regulator has revived confidence for further liberalisation.

Uploaded by Arion Yeow