Foreign issuers could soon be able to list Saudi depository receipts (SDRs) on Tadawul under the Capital Market Authority’s (CMA) draft amendments to the Exchange Rules and Procedures (pdf). The proposed tweaks will be up for public consultation onIstitlaa until Friday, 7 February, and are set to apply to foreign issuers, local depositories, and investors.

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What are SDRs? Saudi Depository Receipts (SDRs) are financial instruments that enable Saudi investors to trade shares of foreign companies on Tadawul, without those companies needing to list their shares directly in Saudi Arabia. Essentially, SDRs represent ownership in shares of a foreign company, with each SDR backed by actual shares held by a custodian in the company's home country.

The rationale: SDRs provide significant benefits to all parties involved. For foreign companies, SDRs offer access to Saudi capital markets and investors without the complexities and costs of a direct listing. For Saudi investors, they provide a tool to invest in international companies while trading on a local platform, eliminating the need to transact on foreign stock exchanges.

To qualify, foreign issuers looking to list SDRs must meet specific requirements. These include having shares listed on another regulated exchange, securing approval to list SDRs from said foreign exchange, having at least 200 public shareholders at the time of listing and ensuring that 30% of issued shares are owned by the public. Issuers are also required to maintain continuous compliance with liquidity and shareholder thresholds.

Other key changes:

  • Foreign issuers must submit additional documents, including SDR allocation details, restrictions, and the share-to-SDR ratio;
  • The relevant authorities will review SDR applications within 45 days, matching the timeline for cross-listed shares;
  • Foreign issuers must disclose SDR-related actions affecting pricing or shareholder rights simultaneously in both domestic and foreign markets.
  • SDR trading may be suspended if corresponding foreign securities are delisted or suspended abroad and/or after a foreign issuer announces a capital reduction in which case trading will resume two days after the general assembly’s resolution;
  • Local depository institutions must notify SDR-holders about general assembly dates, corporate actions and relay instructions from shareholders.

Leveling the playing field? In 2020, the CMA introduced regulations allowing locally-listed issuers to obtain secondary listings abroad for the first time. Similarly to SDRs, the move facilitated cross-border investment.

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