Islamic Finance

Saudi Arabia reduces fees for sukuk and bonds to spur growth of local debt market

Saudi Arabia’s Capital Market Authority (CMA), Saudi Stock Exchange (Tadawul), and Debt Management Office (DMO) are making changes to sukuk and bonds fees to stimulate the development of the local debt market.

In a joint statement, the authorities announced on Thursday changes to fees for issuers, and members and investors, that will come into effect June 9.

Chairman of the CMA Mohammed Al Kuwaiz said the changes are meant to enhance the effectiveness of debt instruments to advance the capital market, in line with Vision 2030.

“This restructuring of fees showcases this cooperation to stimulate development of the debt market and encourage sukuk and bonds issuance and trading,” said Al Kuwaiz in the statement.

Changes for issuers include a reduction of the minimum fee required for annual listing of first issuances on Tadawul, from 30,000 Saudi riyals to 10,000 riyals. For first issuances, Tadawul will introduce a cap of 50,000 riyals for annual listing fees.

For following issuances, fees for annual listing will drop to 5,000 riyals as a minimum fee, down from 30,000 riyals. Tadawul will introduce a cap of 25,000 riyals as annual listing fees for following issuances.

Annual registry fees paid by issuers to the Securities Depository Center (Edaa) will plunge from 100,000 riyals to 20,000 riyals for listed sukuk and bonds.

For members and investors, minimum commission charges will be removed to “encourage fair competition with the services provided by brokerage firms”.

Sukuk and bonds trading commission will be reduced from 2bps to 1 bps of their traded value, and Edaa will introduce a safekeeping fee of 0.4 bps for listed sukuk and bonds holdings per year in an effort to increase trading in the secondary market.

Tadawul CEO Khalid Al Hussan said the changes will encourage issuers to list more local currency sukuk and bonds in the public debt market and facilitate increased trading by investors, which will result in greater market liquidity.

“Increased liquidity of the debt market will, in turn, contribute to the issuance of more diversified debt instruments and introduction of new asset classes for investors,” said the CEO in the joint statement.

Saudi Arabia started selling local currency bonds in mid-2015 to cover a budget deficit caused by low oil prices.

The sovereign started issuing monthly sukuk in mid-2017, and in 2018 Tadawul started listing domestic government bonds.

The full list of fees changes can be found on the Tadawul site here.

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