Nasdaq Dubai, the international stock exchange in the Middle East, is preparing to launch equity futures on leading companies listed in Saudi Arabia.

The futures will give investors new hedging tools to take long and short positions on the companies, at a time when international investor interest in the Saudi stock market is increasing rapidly.

The Saudi companies on which futures will be offered are some of the Middle East’s largest businesses active in sectors including petrochemicals, real estate, banking and transport. The futures trading on Nasdaq Dubai will begin in the third quarter of 2018 on a date to be announced.

Hamed Ali, Chief Executive of Nasdaq Dubai, said, "The framework that we have built for trading and clearing Saudi futures is based on intensive consultations with regional and international market participants including brokers and potential investors. We are delighted to provide investors with an exciting new route to gain exposure to the kingdom’s dynamic and rapidly expanding equity markets. Our futures will provide further impetus to investment into the Saudi capital markets and help develop new links with market participants."

The Tadawul’s TASI share index has risen 10% this year and the exchange’s total market capitalisation is more than SAR 1.9 trillion (507 billion US dollars). Traded value has reached SAR 399 billion so far this year, up 11% from the same period last year. FTSE Russell announced in March that it will upgrade Saudi Arabia to Emerging Market status.

Nasdaq Dubai launched UAE futures trading in September 2016 with single stock futures on seven UAE-listed companies. That number has since increased to 17 and in February 2018 the exchange added futures on Dubai Financial Market’s DFMGI share index as well as the ADI index of Abu Dhabi Securities Exchange. Futures on MSCI’s UAE index will be added soon under a licence agreement signed with MSCI.

The futures market currently operates with leading GCC brokerages as Members, and two active market makers on the UAE contracts. More market participants are preparing to join as Nasdaq Dubai adds the Saudi single stock futures and expands its derivatives platform in phases, to include futures based on stocks and indices of various exchanges in the MENA region as well as options.