RIYADH: The Saudi Securities Clearing House has signed a range of deals with regional entities to widen its presence beyond the Kingdom, a top official said as the institution eyes expansion to other markets.
In an exclusive interview with Arab News on the sidelines of the Saudi Capital Market Forum in Riyadh, Wael Al-Hazzani, CEO of the organization also known as Muqassa, said that efforts and initiatives of the clearing house are playing a crucial role in increasing the confidence of investors in the Kingdom's market.
“As a part of our journey, Muqassa wishes to go beyond Saudi markets. So in Muqassa, we are actually taking serious steps in that direction, where we would like to expand our clearing services into other markets. And we have started this by signing MoUs with regional entities, where we now started to explore the opportunities that will help to tap on those markets,” said Al-Hazzani.
During the interview, Al-Hazzani pointed out that Muqassa is one of the critical players in Saudi capital market developments, as it increases confidence in the market.
“We have a full-fledged clearing house on the market, and this clearing house will be responsible to manage the risk and guarantee the settlement, and simply become the guarantor of the market. We also make sure that all counterparties of any trade fulfill that obligation. That was not the case before the activation of Muqassa, no one was in the market playing that role,” said Al-Hazzani.
He added: “I would say we transform our market on the clearing side to have all exchange-traded and instruments cleared through Muqassa. That, in simple words, will increase the trust and efficiency of our market. And this will eventually increase the confidence in our market because we have a proper risk manager.”
Al-Hazzani noted that the Repo Clearing Service offered by Muqassa will allow trades to be netted across all its members, lowering net settlement exposures.
“In April 2022, we launched the clearing of Repo Service. It is a short-term secured loan where one party sells securities to another and agrees to repurchase those securities later at a specific price. The difference between the initial price and the repurchase price is what they called the profit margin, known as the repo rate,” said Al-Hazzani.
He further noted that Muqassa’s Repo Clearing Service will help to establish a secure rate in the market, which will also, eventually increase the efficiency of Saudi Arabia’s debt market.
Talking about the major offerings from Muqassa, Al-Hazzani said it is now offering a forward repo facility, where “members can have forward start dates for repo transactions.”
“As a part of these enhancements, we are extending the dealing hours from 9am to 3pm. It was from 9am to 2pm. This will help our members to use this service to facilitate any liquidity needs, whether it is for the cash markets or other banking activities,” he further pointed out.
Al-Hazzani added that Muqassa is planning to offer more products on the over-the-counter derivative side which include, clearing interest rate swaps.
“The interest rate swaps are traded off the exchange. Hopefully in future, we will be offering clearing services for the interest rate swaps. We will start with the Saudi Riyal currency, and we will follow it with other currencies. We believe the service will provide a big cost saving and better capital allocation for our participants,” he continued.
