Saudis Deepen Capital Market Reforms With Derivatives Push

Saudi Arabia is intensifying its efforts to reform its capital markets, focusing on increasing derivatives trading and fully opening its equities market to all foreign investors. This strategic move aligns with Crown Prince Mohammed bin Salman's Vision 2030 to diversify the Saudi economy beyond oil. The Saudi Capital Market Authority (CMA) has been at the forefront of these reforms, with the recent appointment of Mazen Al-Sudairi as chairman signaling a renewed push for these changes.

Key reforms include the elimination of the Qualified Foreign Investor (QFI) framework in February 2026, which now allows all foreign investors to directly participate in the Saudi main market, removing prior restrictions such as the requirement for investors to manage at least $500 million in assets. Furthermore, the CMA's 2024–2026 strategic plan explicitly aims to review foreign-investor restrictions and boost international ownership of free-float shares. This direction is also supported by new rules for Over-the-Counter (OTC) Derivatives Contracts, which replaced earlier requirements in February 2026, signaling a more mature and regulated derivatives market.

One significant remaining barrier is the 49% cap on foreign ownership per listed company, a unique restriction among major Gulf exchanges. Morgan Stanley estimates that removing this cap entirely could attract $7.4 billion in passive investment, while even a partial relaxation to 75% could draw $4.3 billion. This reform is particularly crucial for inclusion in global equity indices like MSCI, as changes in foreign ownership limits directly impact a company's investability and index weight. Companies like Saudi Aramco, SABIC, and Maaden, which currently have substantial gaps between their maximum allowed foreign ownership and actual foreign participation (e.g., Aramco with 0.75% actual vs. 49% maximum), stand to see significant inflows if this cap is eased. The urgency to act is heightened by MSCI's index review schedule, with a deadline in late October for any rule changes to impact the November review.