“Tadawul”: Launching the service of transferring collateral to repurchase contracts

The Securities Depository Center Company announced the launch of a guarantee transfer service for the purpose of repurchase contracts. The Saudi Stock Exchange Company, Tadawul, said in a statement that “Edaa” provides this service as part of its strategic plans to provide innovative and effective solutions to all market participants, in line with the best international standards, and within the initiatives of the financial sector development program and the Kingdom’s 2030 vision. By providing the service, “Edaa” aims to provide an effective framework and provide participants with a tool that enhances risk management, indicating that it will enable all parties to transfer collateral for repurchase contracts through the center’s members. An optional service provided by a deposit through custodians to enable buyback agreements, and the service is provided to meet the market needs to create a safe and secured financing framework that reduces the associated credit risk. The buyback transaction applies when the seller has securities on hand and needs liquidity, while The buyer has liquidity and needs a safe investment channel to make a profit within a specific period of time. Both the seller and the buyer must agree on the terms of the repurchase such as currency, amount, guarantees, duration and defaults on the Payment etc., and the transfer of collateral is facilitated through a deposit system (from seller to buyer), cash settlement independently of deposit systems, with termination of the repurchase contract.

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