Goals of Adopting a Two Business Day Settlement Cycle
- Increase the level of asset safety for investors, by providing enough time to verify transactions and deal with errors should they occur.
- Align the Saudi Stock Market with leading global settlement practices, as this will open up new listing opportunities for the Saudi market among other global markets indices.
- Develop an environment that promotes institutional-level investments and meets necessary requirements for coping with any future changes.
What is meant by Settlement?
The settlement of securities refers to the process of transferring securities from a seller’s portfolio to a buyer’s portfolio, whereas cash settlements refer to the process of transferring the value of securities for executed transactions from the buyer’s investment account to the seller’s investment account, through the exchange’s members. Currently, the market applies the (T+0) settlement cycle, where settlement of securities is completed on the same day.
The New (T+2) Settlement Cycle
The (T+2) settlement cycle refers to the period between trade execution, registration of securities’ ownership transferal, and actual payment for the transaction value. This new settlement cycle will be two business days and shall be applied on all transactions for securities listed in the market.