SAMA says 85% of financial derivatives focused on foreign currency, interest rate deals

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The Saudi Central Bank (SAMA) said that 85% of the financial derivatives market is represented by foreign currencies and interest rate derivatives, while other derivatives, such as shares, commodities and credit, have a minimal share, Al-Eqtisadiah newspaper reported.

The average daily transactions on foreign currencies and interest rate derivatives in the market stood at $5.7 billion in one month, according to SAMA. Foreign currency transactions accounted for $5.5 billion, while interest rate derivatives transactions netted nearly $214 million.

Financial derivatives are high risk investments, when compared to other financial products. Derivatives were among the reasons behind the Global Financial Crisis in 2008, SAMA explained.

SAMA is coordinating with stakeholders in the financial sector to develop the infrastructure necessary for enhancing the regulatory environment and reduce the financial derivatives-related risks.

SAMA aims to provide a favorable regulatory environment for banks and clients to mitigate the risks of financial derivatives. Other criteria for governance, risk reduction, market transparency, data availability, reliability, access and participation, data protection and book keeping are also developed.

Moreover, Saudi Credit Bureau (SIMAH) was selected to set up and operate the registration and disclosure center of unlisted financial derivative data.

On August 30, the Saudi Stock Exchange (Tadawul) launched the derivatives market, Argaam reported.