When will Muqassa start its operations in the market?

The Securities Clearing Center Company (Muqassa) is a Saudi company established in 2018 to develop future clearing services in the Saudi capital market, in accordance with the international risk management standards. Muqassa has obtained regulatory approval and QCCP status in Jan2020. Muqassa also has a three-phase market activation:

  • Phase 1 covered index future contracts clearing, started in Aug 2020.
  • Phase 2 will cover Equities, Sukuk, Bonds, ETF’s and REIT’s markets clearing, anticipated in 2022.
  • Phase 3 will cover the full derivatives market clearing, activation date to be determined.

What is the role of Muqassa?

Muqassa centralizes counterparty risk management and ensures a safe and controlled post trade process. In an Exchange with an electronic order book, which matches buyers and sellers, the use of Muqassa is to provide the brokers with the assurance that they are protected regardless of who the counterparty is. Muqassa also protects its members through a centralized risk management process as well as Muqassa rules (which define legally binding obligations and rights over its customers) and procedures for managing the default of a counterparty. This provides a very high degree of legal certainty to the clearing and the centralized risk management processes. In addition, Muqassa facilitates multilateral netting, which reduces the number of settlements in the market; providing major operational benefits for the market and participants.

What is clearing?

Clearing is a post trade activity that includes determination of the obligations of each party prior to settlement, which in turn reduces the risk of counterparty default. During the clearing process, Muqassa acts as a legal counterparty to each participant, providing a guarantee to honor the terms of the original transaction, even if one of the parties defaults before the fulfillment of their obligation.

Will Muqassa clear all securities traded on Tadawul?

Muqassa will clear all securities listed on the market. However, Muqassa has the right to exempt certain securities from its clearing subject to CMA approval. Muqassa can also clear securities traded off the market.

What is the scope of Muqassa guarantee?

Through its risk management mechanisms, Muqassa will be able to guarantee settlement between its members and the obligations fulfillment of each party prior to settlement.

Will the changes affect the trade workflow for investors?

The trade workflow for equity trading will not change for the end investors. However, the changes will enable new asset classes that will allow investors to diversify their portfolio and reduce risk.

Who are the clearing members?

Clearing members are entities who are responsible to clear securities traded by themselves as well as their clients.

Will Muqassa affect the settlement cycle?

The settlement cycle will not be affected by Muqassa’s role.

What are the types of Muqassa memberships?

There are 3 types of membership;

  1. Direct Clearing Member (DCM).
  2. General Clearing Member (GCM).
  3. Members who do not wish to be/cannot be any of the above membership types; can become a Non-Cleaning Member (NCM). However, NCM has to appoint only one GCM to clear its transactions.

What are the requirements for obtaining Muqassa membership?

An applicant that wishes to apply for Muqassa membership must meet Muqassa rules, mainly:

  1. Is an authorized person authorized by the Capital Market Authority for the purposes of the securities business regulations.
  2. Or be a bank which is regulated by SAMA;
  3. Meet the minimum capital requirement based on the intended type of membership.
  4. Proven operations capacity to manage risk and operations.
  5. Complete on-boarding process to Muqassa.

What is the Fee Structure in Muqassa?

Please refer to Muqassa website.