What is the difference between Tadawul and Nomu in Saudi Arabia?

The formation of The Saudi Stock Exchange (Tadawul) was accepted by the Council of Ministers on the 19th of March 2007. This was in an agreement with the Article-20 of the Capital Market Law creating Tadawul as a joint stock company. Tadawul is the only authorized body in the Saudi Arabian Kingdom who performs as the Securities Exchange. It mostly performs listing and dealing in securities, as well as deposit, moving, clearing, settlement, and the process of ownership of securities traded on the Exchange. Tadawul is a partner member of the International Organization of Securities Commissions (IOSCO), the World Federation of Exchanges (WFE), and the Arab Federation of Exchanges (AFE).[irp]

On Sunday, Tadawul (the Saudi Stock Exchange) has started the ‘Nomu-Parallel Market’. Out of 77 companies, only nine Saudi companies are listed on Nomu which plans to support index, boost growth and business development of the economic market. The main characteristics of Nomu- Parallel Market are the listing requirements. The market as compared to the Tadawul has the lesser requirement and serves as a substitute equity market. It has a chance of moving to the main market after new documentation process with the Capital Market Authority (CMA).

It will serve as an alternative platform for companies to go public, and it is limited to experienced investors to invest in this market. The main purpose of establishing Nomu was to serve as a further source of financial support for issuers to access capital, bigger diversification and become deeper of the capital market. Nomu-Parallel Market will release new saving changes to all kinds of corporations which include SMEs, which plays a main part in providing maximum advantage to the economy and helps in development.

There are five main differences between the main exchange and the parallel market. The differences are listing, market capitalization, listing percentage, the number of shareholders, disclosure and fluctuation ratios.

1-Public Offering: In Parallel Market, the offering must be public and is limited to qualified investors. However, in Tadawul the requirement is Initial Public Offering (IPO).

2-Listing Percentage: The number of shares to be offered in the market in the Nomu is 20% while the number of shares to be offered in the Tadawul is 30%.

3-Market Capitalization: The Minimum market capitalization should be 10 million Riyals in Nomu while the requirement in Tadawul SR 100 million.

4-Number of Shareholders: If the total market value of all listed shares goes above SAR 40 million then at least 50 public shareholders are necessary. In case if the market value of the listed shares drops to less than SAR 40 million then at least 35 public shareholders are necessary. The minimum number of shareholders required in a company in Tadawul is 200.[irp]

5-Disclosure of quarterly monetary statements should be within 45 calendar days from the end of the period and the year-end financial statements within 90 calendar days from the end of the period. Daily fluctuation limit is up to 20 percent. Whereas the main market offering must be initiated to the public and should not be less than 30 percent.

Source: Al Arabiya