Stock Trading in the Saudi Financial Market: Everything You Need to Know

Stock trading in the Saudi financial market refers to the process of buying and selling ownership shares in companies listed on the Saudi Tadawul platform. These shares represent partial ownership in the company. The Saudi market is considered one of the largest emerging markets in the region and is supervised by the Capital Market Authority, which ensures regulation and transparency. All stock trading operations in Saudi Arabia are conducted through an advanced electronic platform based on the NASDAQ (X-Stream INET) system, allowing for fast and accurate execution of transactions. Transactions are executed based on price priority followed by time, where the order with the best price is executed first, and in the case of equal prices, the timing of entry is considered. The Capital Market Authority plays a key role in setting the regulations and rules governing trading, aiming to enhance trust and protect investors. The authority also mandates periodic disclosures from companies and monitors their compliance with transparency and full disclosure of financial data. Trading in the Saudi market is an organized activity governed by strict controls to ensure fairness and transparency among all participants.

The Saudi financial market relies on a modern electronic infrastructure for managing stock trading. The trading system used is X-Stream INET from NASDAQ, a sophisticated system that connects orders instantly and executes them electronically based on price and time priority standards. This system allows investors to place buy and sell orders online through licensed brokerage firms, enabling them to monitor prices and executed transactions in real-time. Settlement operations are conducted through a T+2 system, meaning that the settlement of the transaction and the registration of shares in the investor's account occur two business days after the transaction is executed. The market also employs an intelligent monitoring system (SMARTS) to detect suspicious or unusual transactions and protect the market from manipulation. Additionally, the Securities Depository Center manages clearing, settlement, and ownership registration operations, enhancing transaction security and providing a reliable trading environment for investors. All these systems together ensure the efficiency and speed of transaction execution, reducing the risks of errors or manipulation.

The Saudi financial market includes several sub-markets and a variety of financial instruments. The main market (known as Tadawul) includes large companies with significant capital. The Nomu market (parallel market) focuses on small and medium-sized companies with less stringent listing requirements. In addition to stocks, other financial instruments such as sukuk, bonds, exchange-traded funds (ETFs), and real estate investment trusts (REITs) are available. Recently, new financial instruments such as green sukuk and sector investment funds have been launched. Each market or instrument has its own trading rules, but all are subject to the oversight of the Capital Market Authority and serve diverse categories of investors seeking diversification among stocks, debt instruments, and investment funds. The Saudi market specifies trading hours: from Sunday to Thursday, starting with an opening auction session, followed by continuous trading, and concluding with a closing auction session and a closing session at the closing price.

The Capital Market Authority is the highest regulatory and supervisory body for the Saudi financial market. The authority was established under the Saudi Capital Market Law and is responsible for developing and regulating the financial market, ensuring the application of best international practices in disclosure, transparency, and investor protection. The authority issues regulations and rules governing trading and financial disclosure and monitors compliance by listed companies. It also requires companies to disclose financial results periodically (quarterly and annually) and imposes penalties for violations to ensure market fairness. Among the authority's tasks is licensing financial brokerage firms and monitoring their performance, ensuring compliance with client fund protection rules. The authority also monitors transaction execution and prevents any fraudulent practices or trading based on undisclosed insider information. These measures aim to enhance trust and attract local and foreign investments.

Stock transactions in Saudi Arabia are conducted through licensed financial brokers approved by the Capital Market Authority. An investor begins by opening a trading account with a brokerage firm, then deposits funds and submits buy or sell orders through the broker's electronic trading platform. Orders are executed based on price and available quantity in the market. Transaction details are recorded in the market system. After executing the transaction, ownership is settled and registered in the investor's account within two business days (T+2). The investor receives a notification upon transaction completion, and the value of the shares is either deducted or added to the investment account. Each trading operation is monitored and documented electronically, ensuring the safety and transparency of the process. Investors can also track transaction records and price details through the official Tadawul website or brokerage applications.

The Saudi financial market imposes a fixed official trading commission on stock transactions of 15.5 basis points (0.155%) of the transaction value. This is in addition to brokerage firm commissions, which may vary from one firm to another based on the services provided. There are also other fees related to the clearing and deposit system, as well as specific government fees for certain transactions. All fees must be disclosed and transparent to investors, and the authority requires brokers to announce them clearly. Investors should review the complete fee schedule with their broker before starting to trade. The commission is automatically deducted upon transaction execution. It is important to note that lower fees do not necessarily mean higher service quality; investors should balance cost with platform quality and technical support.

Market indicators are among the most important tools for tracking the performance of the Saudi stock market. The main index is the general market index (TASI), which measures the price movements of the largest listed companies. There are also sector indices that measure the performance of sectors such as banking, energy, telecommunications, and petrochemicals. Indicators help investors assess the overall market trend and compare the performance of their investment portfolios against the benchmark index. They are also used to track liquidity movements and identify periods of market upswings and downturns. An increase in the general index indicates improved performance of the majority of stocks, while a decrease signifies a general market decline. Indicators are updated in real-time during trading sessions, and their data is available through the official Tadawul website and its electronic applications.

The Capital Market Authority requires all listed companies to provide periodic disclosures about their financial results and any significant events that may affect the stock price. Companies must announce financial statements quarterly within 30 days of the end of each fiscal quarter and annual results within 90 days of the end of the fiscal year. Disclosure includes clarifying profit details, revenues, cash distributions, and any changes in management or strategic plans. The main goal of these requirements is to enhance transparency and enable investors to make decisions based on accurate and reliable information. The authority also monitors companies' compliance with international accounting standards and imposes penalties for breaches of disclosure obligations. Investors can follow all announcements through the official Tadawul website, where financial reports and significant announcements are published immediately.

Saudi Aramco (symbol 2222) is the largest listed company in the Saudi market by market capitalization and serves as a prime example for understanding financial indicators in stock trading. The price of Aramco's share during 2024-2025 ranged between 40–50 Saudi Riyals, giving it a market value exceeding 8–9 trillion Riyals. The company's price-to-earnings (P/E) ratio ranged between 10 and 12 times during the same period, indicating the strength of the company's earnings relative to its share price. The dividend yield was approximately 4–5% annually based on the share value, as the company distributes a significant portion of its net profits to shareholders. In the fourth quarter of 2024, Aramco announced substantial revenues with annual revenue growth despite some fluctuations in net profits due to global oil price movements. These indicators highlight the importance of monitoring quarterly financial data and comparing the company's indicators with its peers in the sector to make informed decisions.

The energy and oil sector is one of the largest sectors in the Saudi financial market, led by the industry giant Saudi Aramco. This sector is directly affected by global oil prices, production levels, and government policies related to energy. In recent years, the sector has undergone significant transformations as the Kingdom aims to diversify its economy under Vision 2030, through investments in petrochemicals and renewable energy. Despite environmental challenges and global pressures to transition to clean energy, the oil sector retains its strategic importance in Saudi Arabia. The sector accounts for a significant share of market capitalization and directly impacts general market indicators. Major energy companies, such as Aramco and SABIC, continue to achieve high profits and attractive dividends for investors, solidifying the sector's position as one of the pillars of the financial market.

The Saudi financial market is characterized by a diversity of sectors and listed companies. In the energy sector, Aramco leads the list of major companies, while SABIC stands out in the petrochemical field. In the banking sector, Al Rajhi Bank, National Commercial Bank, Saudi French Bank, and Saudi British Bank compete for the largest market share. In the telecommunications sector, Saudi Telecom Company (STC) leads, competing with Mobily and Zain. There are also leading companies in the retail and industrial sectors, such as Extra, Al-Hokair, and Al-Othaim Markets. Competition in the Saudi market is not only about size but also includes innovation, product quality, and financial performance and disclosure. This environment provides investors with multiple opportunities to diversify their investment portfolios.

The Saudi financial market has seen a significant increase in foreign investor participation in recent years. Foreign ownership limits have been gradually raised, allowing qualified international investors (QFI) to trade stocks within specific limits according to each sector. The authority allows foreign investors to open trading accounts through local brokers, requiring them to register and comply with regulatory requirements. The maximum foreign ownership limit for some companies has reached 49% or more in certain cases, reflecting openness to global investments. The Saudi market has attracted the attention of international funds after being included in global indices such as MSCI and FTSE, with daily liquidity and the number of active investors continuously rising.

The Saudi financial market has witnessed significant regulatory developments during 2024-2025, including enhanced governance and disclosure requirements, and updates to the rules for listing small and medium-sized companies in the Nomu market. The market has also launched new financial instruments such as green sukuk and sector investment funds, and new companies have been listed in the real estate and industrial sectors. In terms of performance indicators, the main market index (TASI) rose significantly by the end of 2024, supported by a rebound in energy and banking stocks. The average daily liquidity increased to over two billion Riyals, reflecting the market's attractiveness to local and international investors. The authority continued to monitor compliance and adopted policies to stimulate foreign and local investments, contributing to the deepening of the market and increasing the diversity of available financial instruments.

Stock trading involves a range of risks that investors should be aware of. Among the most prominent risks are price fluctuations, which can lead to capital losses. The financial performance of companies is influenced by several factors such as economic conditions, regulatory changes, and global market movements. There are also liquidity risks, especially in smaller or low-trading companies, where it may be difficult to sell shares quickly at the desired price. Additionally, attention should be paid to the risks of inadequate disclosure or delays in publishing financial results, despite strict regulations. It is always advisable to diversify and not rely on a single stock or sector, and to review financial statements and governance reports before making any decision. Finally, it is important to consult a licensed financial advisor to assess risks appropriately.