Background -

On 21 December 2016, the Capital Market Authority of Saudi Arabia (the CMA) approved the Parallel Market Listing Rules (the Rules), thereby establishing the Parallel Market, an alternative market to the Main Market of the Saudi Stock Exchange (Tadawul) (the Stock Exchange). The stated objective of the Parallel Market has been to provide an opportunity for a wider spectrum of issuers to obtain a listing on the Stock Exchange, as an alternative to obtaining a Main Market listing. This is particularly relevant for small to medium sized enterprises (SMEs) that could benefit from a listing, but are not yet in a position to comply with the more stringent eligibility for listing requirements of the Main Market. The introduction of the Parallel Market also completes another step in implementing “Saudi Vision 2030”, which promoted the role of the Stock Exchange in providing additional funding sources, and greater opportunities for growth, to a broader range of businesses.

The Rules come off the back of other significant recent legal developments in the capital markets landscape of the Kingdom, including the Qualified Foreign Financial Institutions Investment in Listed Securities (the QFI Rules), which came into effect on 1 June 2015, the Real Estate Investment Traded Funds Instructions, which came into effect on 24 October 2016, and the Instructions of Book Building Process and Allocation Method in Initial Public Offerings (the Book Building Instructions), which came into effect on 1 January 2017. The Rules can be seen as the next chapter in the Kingdom’s ongoing effort to grow and deepen its capital market.