VISION

Post-trade service provider of choice, building bridges between issuers and investors, domestically and internationally.

MISSION

Offer innovative and trusted post-trade products and services in line with highest international standards that create value for clients.

The Securities Depository Center Company (Edaa) was formed in Riyadh on 30 August 2016 as a closed joint stock company under Commercial Registration No. 1010463866 dated 11/27/1437 AH. Edaa’s main activities are providing deposit, settlement, and registration services.

Edaa’s key functions

Edaa is responsible for the DSS, which is an electronic system, maintains a record of securities and their ownership. Depository is one pillar of the new strategic framework of STG. In addition, Edaa offers several value added services some of which have been enhanced in 2021. Edaa facilitates a range of securities including equity, debt, Sukuk and bonds, ETFs, REITs, and mutual funds. In addition to its core function Edaa provides other management services including management of issuer’s general meetings, e-voting, reporting and notifications.

With the advent of the COVID-19 pandemic, and the resulting health precautions, Edaa had to modify some of its systems and procedures to ensure the protection of the shareholders. In the context of supporting the preventive and precautionary efforts and measures exerted by the competent and relevant health authorities to address the emerging COVID-19. Edaa has encouraged companies to hold their general assemblies remotely. However, all these changes were implemented smoothly.

Impact of formation of Group

With the formation of the Group, Edaa, which was a previously a subsidiary of the Exchange, became a subsidiary of STG. In common with the other subsidiaries, this transformation has given us more focus in several dimensions; in our strategies, projects, and ambitions. The new structure will result in better governance and better direction for Edaa, as well as the rest of the Group.

The formation of Tadawul Advanced Solutions Company (WAMID), a newly created subsidiary focused on solutions and pioneering technologies, opens up new vistas for Edaa and the other subsidiaries. It creates opportunities to develop new and innovative products and services.

Despite the transformation, Edaa continues to offer post-trade advanced and comprehensive post-trade solutions, which makes it a complementary business to the Exchange as before. Nevertheless, the independence the new structure has given, provides the opportunity to branch off into new business lines.

Highlight of the year

In terms of operations, 2021 has been a very successful year for the market. Remarkable growth has been visible in number of listings, trading value, trading volume, new portfolios or any other important market indicator.

• At the end of 2021, the TASI Index rose by 29.83% over end 2020
• The corresponding increase in the market capitalization was 9.97%; in the value of shares traded 7.09%
• Nine new listings in the Main Market as against four in 2020

While there was no significant change in the nature of market operations, with the increase in trading volumes Edaa had to scale its capabilities to match the increased demands in processing needs, which was done very successfully. As we handle post- trade we have a part to play in all market transactions.

Security Lending Mechanism

Another major development that occurred during the year was the enhancement of the securities lending mechanism. New securities lending and short selling rules were published jointly by the Exchange and Edaa, to align standards with international best practices. Certain restrictions that were in the previous draft documents have been relaxed to promote lending. The new rules also permit a non-qualified investor to participate in the lending market either through an agent lender (on the lending side) or through a broker or his custodian (on the borrowing side). Edaa however retains the right to disclose any information regarding securities lending transactions, as it considers appropriate.

The Introduction of ICSDs

There were also developments in the links with other exchanges and International Central Security Depositories (ICSDs), a process which had already commenced prior to the year under review. MOUs had been signed with Abu Dhabi Securities Exchange and Bahrain Clear. These agreements have laid the groundwork for us to enter into cross listing. Earlier in 2020, an MOU was signed between Edaa and Clearstream (the post-trading services provider of Deutsche Börse Group), to facilitate access for investors in Saudi Arabia, through cross-border links. This agreement commenced live operation in 2021, thereby providing international investors access to the Saudi debt market. An agreement was also signed in October 2021, with Euroclear Bank to foster links between the two depositories and enhance access for investors. This agreement is expected to go live in 2022.

Signing Ceremony with Euroclear at FII yearly conference

Agreement signing with Clearstream

Vision

To be a leading clearing house that fosters financial market stability.

Mission

To provide reliable, efficient and innovative clearing services.

The Securities Clearing Center Company (Muqassa) was established in Riyadh on 18 February 2018 as a closed joint stock company under Commercial Registration No. 1010935131 dated 06/02/1439 AH. Muqassa’s primary activity is to provide clearing services.

Functions of Muqassa

Muqassa’s strategic role is to be a key contributor to the safety and transparency of the capital market. The main functions of Muqassa have been identified as assuming counterparty risk and netting of transactions. It thereby contributes to the goals of the Financial Sector Development Plan (FSDP), one of which is the development of an advanced capital market. Muqassa acts as an intermediary to the trading process by being a buyer to each seller, and a seller to each buyer. The netting of transactions will be carried out on a multilateral basis and will reduce the number and value of payments and securities transfers. With the transition to the new Group structure, Muqassa became a subsidiary of the Saudi Tadawul Group.

Impact of formation of Group

The transition to the new Group structure has given more focus to the subsidiaries and enabled them to concentrate on their core functions, since shared services have been taken over by STG.

While the previous strategic plan has been revamped with a new time horizon of 2025, there is continuity with the original plan. Many of the initiatives relating to Muqassa are carried forward into the revised plan. The new structure has not resulted in any major changes to Muqassa’s operations. However, it has necessitated modifications to certain operations-related documents, such as the service level agreements Muqassa has entered into with Edaa and the Saudi Exchange. When developing its services, Muqassa always considers alignment with Group strategic plans as paramount.

Highlights of the year

Since the activation of Muqassa, the main project which has been completed is the netting of Index futures. However, a great deal of effort has been expended on developing products and services to be activated and introduced to the market. Our efforts have been directed towards achieving the level of service we are aiming at. Many in-depth discussions have been conducted to this end, with internal stakeholders and external regulators.

Muqassa, broadly speaking, deals with two markets; derivatives and cash. In derivatives, the index future has been the main development to date. Muqassa’s role in the cash market is yet to be activated. When it is, functions such as covering counterparty risk and clearing of securities will be implemented by Muqassa. At present clearing has been activated for index futures only, which has contributed to efficiency in this market; for the cash market, it is being partially carried out by Edaa for the moment. Covering counterparty risk is presently being partly carried out for the cash market, by the Exchange, but the complete function is to be taken over by Muqassa. Once the developments in progress for the cash market are completed, Muqassa will bring to the market approximately 80% of the combined value of cash and securities.

Many training activities needed to be carried out for the staff, since Muqassa is providing new services to the market. These training sessions were conducted for both Muqassa staff and the staff of the other group companies, and covered both business and technical aspects. Muqassa has also conducted workshops and awareness sessions for the market participants, to prepare them for changes in business activities that are in the offing.

Vision

WAMID is the Group's technology innovation subsidiary targeting Saudi and regional capital markets, providing innovative services focusing on data & AI, market infrastructure and disruptive technologies.

Mission

To partner with market participants, and the wider business community, to build ambitious and dynamic solutions that leverage emerging technologies to address real-world challenges.

Tadawul Advanced Solutions Company (WAMID) was established in Riyadh on 28 September 2020 as a closed joint stock company under Commercial Registration No. 1010656577 dated 02/11/1442 AH. WAMID’s activities include financial technology solutions, research and development in the field of innovation and technology, market research, and opinion polls.

Wamid’s key functions

As WAMID came into existence only in 2021, there has not been sufficient time for it to make a significant impact yet. However, WAMID has introduced the first service (the Co-location) to elevate the sophistication of the Saudi capital market infrastructure and offering.

WAMID is a fully-fledged innovation company in the Saudi Tadawul Group with the following features;

• STAND-ALONE INNOVATION COMPANY
• which directly generates autonomous recurring revenues
• STAND-ALONE VENTURE BUILDER
• providing ideation and sandboxing services to external parties

WAMID is also a innovation incubator within the Group;

• STG DESIGN THINKING HUB - acting as the Group's ideation and sandboxing environment
• STG INNOVATIVE TECH SERVICES PROVIDER - offering to the Group the necessary platforms and infrastructure

Wamid’s strategic thrusts

WAMID’s strategic focus is built on the objectives mentioned below:

• Being the trusted technological partner of choice for Saudi and regional businesses
• Enhancing the investor experience in the market by use of cutting–edge technology and positioning itself as an innovation hub
• Developing the infrastructure which will provide a base for new product and service development
• Building partnerships to foster innovation
• Capitalizing on acquisition and venture capital opportunities
• Being a driver of the expansion of STG

Highlights of the year

A major innovation has been the opportunity provided to market players to co-locate their servers and equipment within our Tier IV Data Centre. This will allow them to have LAN connectivity access to our trading engine. The service will be provided to both trading and non-trading customers and will reduce latency (delays in transmitting and processing data), as well as architecture complexity. This pioneering initiative will enable customers, to swiftly implement their data, trading, and execution strategies.

The Co-location service launched by WAMID offers trading participants (members and non-members) the opportunity to co-locate their services and rent server space within Saudi Tadawul Group’s Data Centre to ensure the lowest latency route possible to the Group’s trading services and products. The co-location service will also reduce network complexity and unlock high-speed connectivity for users.