A resilient strategy
During the year under review, the five year strategy that had been formulated for the period 2018-2022 continued in its essence.
The framework of the plan consisted of:
The strategy is structured to be in alignment with the Vision 2030 and the Financial Sector Development Program (FSDP).
The Corporate Strategy Department, in coordination with business units and other stakeholders, develops divisional annual roadmaps and plans, which are aligned with the corporate strategy. The divisional plans are then translated into a greater degree of granularity in the form of targets and KPIs.
Strategy in action
Despite the unfavourable conditions that prevailed, a large number of initiatives were completed or were in progress by the end of the year under review.
The following initiatives and projects were completed during the year 2020.
|Completion of the Network Infrastructure upgrade Programme|
|Completion of implementation of required REITs disclosure|
|Launching of Derivatives Market and Securities Clearing Center Company, Muqassa|
|Fixed Income Indices Development Partnership|
|Launch and migration to Tadawul New Data Center|
|Direct listing in Nomu Parallel Market|
|Enhance ETFs and build ETP framework|
|Enhancements to negotiated deals and fluctuation limits mechanism|
|Enhancements to listed companies Share Buy-back Ownership Report|
|Approval of instructions on issuing depository receipts out of the Kingdom|
|Launch of Repo Collateral Transfer Service|
The following projects are near completion or are new initiatives planned for 2021.
|Post Trade Infrastructure Program Phase 1|
|Introduction of Market Makers|
|Introduction of Single Stock Futures|
|International Central Securities Depository (ICSD) links enabled|
|Launch of Sharia compliant Indices|
|Collateral Management Account Services|
|Debt Market Microstructural Enhancements|
|Midpoint Closing Price Calculations|
One of our main overarching objectives, that of being a diversified and integrated exchange drives many of our initiatives. It also motivates us to think out-of-the-box and with a long-term horizon, while not being constrained by the contours of the current strategic plan.
The first of our value drivers, being a diversified and integrated exchange, drives many of our initiatives. It also motivates us to think out-of-the-box and with a long-term horizon, while not being constrained by the contours of the current strategic plan. In 2020, despite constraints imposed by the pandemic, we have made commendable progress towards achieving the goals of the strategic initiatives.
A landmark event of 2020 was the launching of the derivative market. This greatly enhanced the maturity of the market and was a step forward in achieving parity with leading global exchanges.
The launching of derivatives opens up new avenues for investors and will also pave the way for rolling out of more sophisticated market products in the future. It will also help investors to hedge their positions. In tandem, there was also another related development; the securities clearing house Muqassa came on stream. Muqassa will help streamline post-trade by managing the counterparty risk.
Since the admission of foreign investors to Tadawul in 2015, reforms have progressively been made to attract more investment from overseas to the market. Another milestone was reached in 2020 when QFIs were admitted into the debt market. Yet another major step forward was the approval granted for Saudi companies to issue Depository Receipts (DRs). DRs will provide a vehicle for foreign investors to purchase and trade in shares of Saudi companies on their own exchanges. The Parallel Market Nomu also launched a major initiative to enhance the market. Potential issuers may now list directly on Nomu eliminating the process of an IPO. This will greatly ease the process of listing by reducing the cost, time and effort involved in an IPO.
While the COVID-19 pandemic did not cause any major modifications to the strategy, it did result in adjustments to some of the initiatives and project timelines. Certain activities such as recruitment, physical meetings, workshops, training and events had to be conducted virtually or rescheduled for 2021. Physical access for vendors and consultants was constrained, which impeded certain activities.
2021 and beyond
Several initiatives are in the pipeline including upgrading post-trade infrastructure, new derivative products, Tadawul IPO, and implementation of a future-ready operating model. With what has been achieved during 2020 despite headwinds, we look to the future with the confidence of achieving our strategic objectives.