Deals in the Saudi financial market are one of the pivotal concepts that form the foundation of trading activity in the local stock market. The term "deals" refers to the buying and selling of securities conducted through the Saudi trading platform (Tadawul), encompassing both public deals executed directly through the electronic trading system and private deals made by direct agreement between two parties outside the usual trading platform. In recent years, the Saudi financial market has witnessed significant growth in the volume and value of executed deals, driven by an increase in the number of active investors, heightened liquidity, and the adoption of modern trading technologies. This is clearly reflected in the official statistics for 2024, where the average number of daily deals rose to hundreds of thousands, and the daily trading value ranged between 10 and 15 billion riyals. The settlement mechanism has also evolved to a T+2 system, adding greater flexibility and speed in completing deals. In this comprehensive guide, we delve deeply into the types of deals, their execution cycle, their impact on the market and companies, and the role of regulation and transparency in enhancing investor confidence. We will also highlight the latest developments and answer the most frequently asked questions about deals in the Saudi financial market. All of this is presented in an educational and neutral language, in accordance with the approved regulatory frameworks, while emphasizing the importance of consulting a licensed financial advisor when making any investment decision.
What are Deals in the Saudi Financial Market?
Deals in the Saudi financial market represent trading operations executed to buy or sell stocks and securities through the trading platform. The execution of deals is the cornerstone of market movement, as each deal represents the result of a buy order meeting a sell order at the appropriate price and quantity for both parties. These operations are recorded automatically and announced immediately within market data. Deals can be divided into public deals, executed daily through the electronic trading system, and private deals executed outside the platform between specified parties, often characterized by their large size. Deals affect price movements, liquidity, and the level of transparency in the market, serving as a key indicator of investor activity.
Types of Deals: Public vs. Private
Deals in the Saudi market are divided into two main types: public deals, which are executed through the continuous trading mechanism on the platform, where supply and demand meet automatically, and the order is executed as soon as the price and quantity match. These deals are the most common and include all investors, from individuals to institutions. Private deals, on the other hand, are agreements made outside the usual order book, often between two institutions or large investors, characterized by their large value and primary goal of reducing the price impact on the market. Private deals are announced after execution and settled according to regulatory rules. Both types are subject to oversight and disclosure to ensure transparency.
Deal Execution Cycle and the New T+2 Settlement Mechanism
The deal execution cycle includes several stages, starting with the investor placing a buy or sell order through a licensed broker. When orders match, the deal is executed immediately, but the financial settlement and transfer of ownership occur later. Since April 2024, the Saudi market has adopted the T+2 settlement mechanism, meaning that final settlement occurs two business days after the deal is executed. This system provides greater flexibility for investors and aligns with global best practices. During the settlement period, the stock and the financial amount are held within the accounts of the parties, and the transfer of ownership and recording of profits is completed after the period ends. This step has enhanced liquidity and facilitated the entry of new investors.
Volume and Value of Deals: Performance and Activity Indicators
The volume of deals (both in number and value) represents one of the most important indicators of market activity. The year 2024 witnessed a significant increase in the average number of daily deals, reaching hundreds of thousands, while the daily trading value ranged between 10 and 15 billion riyals. This momentum reflects increased liquidity and investor interest. Additionally, the total market capitalization of listed companies exceeded 30 trillion riyals by the end of 2024. The growth in deals often translates into increased market depth and flexibility, indicating the effectiveness of trading tools and regulatory policies. Investors track these indicators to make their decisions and assess the attractiveness of the Saudi market compared to regional and global markets.
Impact of Deals on Stock Prices and Company Performance
Deals, especially large ones, play a pivotal role in determining stock prices and their market value. Executing a large buy deal may lead to a price increase due to heightened demand, while a massive sell deal may push the price down. Listed companies benefit from increased deal volume through enhanced liquidity and improved pricing of their shares, which can enhance their attractiveness to investors. Additionally, acquisition and merger deals often lead to strategic shifts in company performance, with the results of these deals reflected in their periodic financial statements. It is important to note that the impact of deals is not always immediate or direct, as it may be influenced by market factors and general news.
Growth in Investor Numbers and Investment Portfolios
The number of active investment portfolios in the Saudi market has risen unprecedentedly, exceeding 12 million accounts by the end of July 2024. This growth is a result of awareness efforts, technological advancements, and the ease of opening investment accounts electronically. An increase in the number of investors means more daily trades and a higher density of deal execution. The entry of new segments of investors (individuals, institutions, and qualified foreigners) has also enhanced depth and liquidity. As the number of active accounts increases, the likelihood of diverse deals across various sectors rises, which enhances market stability and expands the participant base.
Role of the Financial Sector and Banks in Supporting Deals
The activity of deals is closely linked to the financial services sector in the Kingdom, particularly brokerage firms and banks. These entities provide financing facilities, manage trading orders, and execute deals on behalf of investors. With the expansion of lending and increased liquidity, investors' capacity to conduct larger and more frequent deals increases. Asset management companies and investment funds also contribute to raising trading volumes through their active strategies. The FinTech sector has added a new dimension through smart trading applications, increasing the speed of deal execution and attracting younger demographics to the market.
Competition Among Investment Channels and Its Impact on Deals
The Saudi stock market competes with other investment channels, such as real estate, sukuk and bonds, and real estate investment trusts (REITs). When the attractiveness of stocks rises and deal activity increases, liquidity may shift from other sectors toward the financial market. Additionally, local electronic trading platforms compete with their global counterparts, especially as investors become open to international stock markets. However, government initiatives and local investment incentives have strengthened the position of the Saudi market and maintained the flow of liquidity toward Tadawul and local company shares. Regulation and transparency remain the key factors in investors' preference for the Riyadh Stock Exchange.
Latest Regulatory and Technological Developments Impacting Deals
The year 2024 witnessed several significant developments, most notably the implementation of the T+2 settlement system, which enhanced the speed and flexibility of deal execution. The financial market also launched options contracts on some leading stocks, providing investors with advanced hedging and speculation tools. The number of qualified foreign investors increased due to streamlined procedures, and awareness campaigns grew to familiarize new investors with the deal system. Technologically, smart applications and modern trading platforms have improved execution efficiency and provided real-time data on deals, leading to a noticeable increase in the number of daily deals and enhanced transparency and oversight.
Large Deals: Mergers and Acquisitions and Their Market Impact
Large deals such as mergers or acquisitions between major companies constitute pivotal events in the financial market. These deals are often announced separately from daily trading but indirectly affect stock prices and investor interest. In recent years, acquisition and merger deals have been made in the banking, cement, and energy sectors, strengthening the involved companies and increasing their market liquidity. These operations lead to market restructuring, increased operational efficiency, and may raise the profitability rates of the target companies. Investors closely monitor news of large deals due to their impact on market trends.
Transparency and Governance: Protecting the Market and Building Trust
Transparency and governance are fundamental pillars for protecting investors and enhancing confidence in the financial market. The Saudi Capital Market Authority requires companies to promptly disclose any large deal or significant change in ownership, in addition to monitoring insider trading and suspicious deals. These measures ensure information parity among all participants and prevent manipulation or exploitation of undisclosed information. Laws emphasize the need for disclosure of major shareholders' deals and impose strict penalties on violators. All of this serves to enhance the credibility of the market and attract more local and foreign investors.
Foreign Investment and Its Role in Increasing Deal Activity
The Saudi market has seen an increasing influx of foreign investors, especially after facilitating qualification procedures and expanding the qualified foreign investor (QFI) base. The percentage of foreign participation in executed deals has significantly increased, and it is expected to reach 35-40% of trading volume by the end of 2025. Foreign investors often focus on leading stocks and large deals, enhancing market liquidity and depth. Additionally, the entry of foreign capital supports the valuation of Saudi companies and signals global confidence in the local investment and regulatory environment.
The Role of FinTech in Evolving Deal Execution
The evolution of financial technology has radically changed how deals are executed in the Saudi market. Smart applications have provided real-time trading capabilities, allowing buy and sell orders to be placed from anywhere at any time. These digital solutions have added greater transparency by displaying deal records and analyzing market data in real-time, facilitating the entry of new investors. Brokerage firms have competed to offer advanced electronic services, from low commissions to essential technical analysis tools. This digital transformation has contributed to increasing the daily deal volume and diversity.
Regulatory Tips and Guidelines When Dealing with Deals
The Saudi financial market adheres to strict rules governing deal execution to ensure integrity and protect investors. All participants are advised to review regulatory frameworks, understand settlement mechanisms, and follow official disclosures regarding large deals. It is also recommended to leverage advanced brokerage tools to improve deal execution quality and be mindful of commission and fee costs. It is important to ensure that reliable data sources are followed and to seek advice from a licensed financial advisor before making any investment decision, especially regarding large or complex deals.
Conclusion
Deals form the backbone of activity in the Saudi financial market and are a key indicator of market health and trading effectiveness. In recent years, significant developments have occurred in the volume and value of deals, driven by an increase in the number of investors, advancements in technological infrastructure, and improvements in the regulatory environment. It is important for investors to understand the types of deals, their execution cycle, and their impact on stock prices and companies, as well as to keep up with the latest regulatory and technological developments. The SIGMIX platform allows investors and followers to access updated data and analyses on deal movements in the Saudi market. To ensure informed investment decisions, it is always recommended to consult a licensed financial advisor before executing any deal, especially in light of market fluctuations and the variety of available investment options.
Frequently Asked Questions
A deal is the execution of a buy or sell order for a stock or security through the Tadawul platform. A deal occurs when a buy order matches a sell order at the price and quantity, and it is executed and recorded in the system immediately. This includes daily public deals and private deals made between specified parties outside the order book. The deal is fundamental to market movement and price determination.
Public deals are executed through the electronic trading system, where buy and sell orders meet continuously at prevailing market prices. Private deals, on the other hand, are typically large transactions made by direct agreement between two parties outside the general trading system, and are then announced and settled according to market rules. Private deals aim to reduce the direct price impact of large quantities on the stock price in the market.
Deals are settled according to the T+2 system adopted since April 2024, meaning that the transfer of ownership of stocks and the transfer of financial amounts occur two business days after the deal is executed. During the settlement period, stocks and amounts are held within the brokers' accounts until the process is completed, then stocks are registered in the buyer's name and funds are transferred to the seller. This system increases market flexibility and liquidity.
Large deals often lead to noticeable movements in stock prices, especially if they are in one direction (large buy or sell quantities). In some cases, large buy deals may raise the price due to increased demand, while large sell deals may lower the price. Private deals aim to minimize the immediate price impact by executing them outside the order book.
Brokerage and electronic trading platforms provide real-time records of executed deals, including price, quantity, and execution timing. Daily aggregate data can also be accessed through the official Tadawul website. Additionally, some economic news websites publish details of the largest executed deals, especially private deals or those with significant impact.
The Saudi financial market does not disclose the identities of the parties executing deals, whether public or private, to maintain transaction confidentiality and protect the market from psychological influences or manipulation. Only prices and quantities are available to the public, while regulatory authorities are obligated to disclose if one party's ownership exceeds certain percentages according to regulations.
An investor officially becomes the owner of the stock after the completion of the settlement process, which occurs two business days after the deal is executed (T+2). At that point, the stocks are registered in the buyer's name in the market records, and they are entitled to benefit from the rights associated with the stock, such as voting and receiving dividends declared after this date.
Market depth refers to the presence of large quantities of buy and sell orders across multiple price levels, allowing large deals to be executed without significantly impacting the stock price. Sufficient market depth contributes to providing liquidity, higher flexibility, and reducing price volatility resulting from sudden or large deals.
Regulatory frameworks in the Saudi market impose rapid disclosure of large deals and significant ownership changes, in addition to monitoring insider trading and suspicious deals. These measures ensure information parity and prevent manipulation, thereby enhancing confidence and encouraging participation from local and international investors in the market.
Financial technology has transformed deal execution by providing electronic trading platforms and smart applications that allow real-time order execution, displaying market data instantly, and analyzing deals efficiently. This has increased the number of active investors, facilitated the entry of new segments, and contributed to raising the volume and value of deals executed daily.