Saudi Arabia: Establishment Of The Parallel Market Of The Saudi Stock Exchange

Last Updated: 25 July 2017
Article by Nabil A. Issa, Rizwan H. Kanji, James Stull and Hamed Afzal


On 21 December 2016, the Capital Market Authority of Saudi Arabia (the CMA) approved the Parallel Market Listing Rules (the Rules), thereby establishing the Parallel Market, an alternative market to the Main Market of the Saudi Stock Exchange (Tadawul) (the Stock Exchange). The stated objective of the Parallel Market has been to provide an opportunity for a wider spectrum of issuers to obtain a listing on the Stock Exchange, as an alternative to obtaining a Main Market listing. This is particularly relevant for small to medium sized enterprises (SMEs) that could benefit from a listing, but are not yet in a position to comply with the more stringent eligibility for listing requirements of the Main Market. The introduction of the Parallel Market also completes another step in implementing "Saudi Vision 2030", which promoted the role of the Stock Exchange in providing additional funding sources, and greater opportunities for growth, to a broader range of businesses.

The Rules come off the back of other significant recent legal developments in the capital markets landscape of the Kingdom, including the Qualified Foreign Financial Institutions Investment in Listed Securities (the QFI Rules), which came into effect on 1 June 2015, the Real Estate Investment Traded Funds Instructions, which came into effect on 24 October 2016, and the Instructions of Book Building Process and Allocation Method in Initial Public Offerings (the Book Building Instructions), which came into effect on 1 January 2017. The Rules can be seen as the next chapter in the Kingdom's ongoing effort to grow and deepen its capital market.

The Rules

The Rules consist of 29 articles, which regulate all aspects of the Parallel Market, ranging from the investors who are eligible to trade on the market to the eligibility requirements for listing.

Which entities are eligible for listing on the Parallel Market?

The Rules provide that not only Saudi joint stock companies, but also joint stock companies which are majority owned by nationals of the Cooperation Council for the Arab States of the Gulf (GCC), are eligible for listing on the Parallel Market. For example, therefore, a UAE incorporated limited liability company which is 51 per cent. owned by its founding shareholders may, following its conversion to a public joint stock company, apply for its shares to be listed on the Parallel Market.

Who can invest on the Parallel Market?

The Rules provide that only "Qualified Investors" may invest in shares listed on the Parallel Market, which is defined to include, as one may expect, the usual categories of sophisticated investors but also, significantly, "qualified foreign investors" (registered in accordance with the QFI Rules) and companies and funds established in any GCC member state. Any shareholders who owned their shares prior to the issuer's listing may also continue to hold such shares.

Role of an appointed financial adviser

The Parallel Market and the Rules share a number of common characteristics with the Alternative Investment Market (AIM) of the London Stock Exchange (LSE), which is also regarded as an alternative listing venue for smaller or growing companies, and as a stepping stone to an LSE Main Market listing. Similar to AIM, which requires a nominated advisor (typically referred to as the "Nomad") be appointed by the issuer to guide it through the listing process and provide certain confirmations to the LSE, the Rules require a financial advisor be appointed by an issuer requesting an admission to listing on the Parallel Market. As is the case with a Main Market listing, the financial advisor must, among other things, act as a point of contact with the CMA and satisfy itself, having conducted appropriate due diligence, that all relevant listing conditions have been satisfied and confirm the same to the CMA by way of written confirmation. It is essential therefore that CMA approved financial advisors proposing to act on such listings become sufficiently familiar with the Rules, so as to allow them to discharge their responsibilities to the issuer and the CMA.

Eligibility for Listing Requirements

Among the most significant provisions of the Rules are the eligibility for listing requirements, which are less stringent than those applying to the Main Market. The most noteworthy differences in the eligibility requirements of the Parallel Market compared to the Main Market are as follows:

Parallel Market Main Market
Track Record Must have been carrying on a main activity for at least one financial year Must have been carrying on a main activity for at least three financial years under substantially the same management
Financial Statements SOCPA audited financial statements for preceding financial year only SOCPA audited financial statements for three financial years
Aggregate market value of shares to be listed (i.e. expected market capitalisation) At least SAR 10 million At least SAR 100 million
Minimum shares to be held by the public (i.e. "free float") Not less than 20 per cent. Not less than 30 per cent.
Minimum number of public shareholders Not less than 50 shareholders if the total market value of all shares to be listed is more than SAR 40 million

Not less than 200 shareholders

Not less than 35 shareholders if the total market value of all shares to be listed is less than SAR 40 million

As evident from the above, the CMA has sought to balance its objective of encouraging and allowing market access to SMEs by relaxing the Main Market eligibility requirements, while at the same time ensuring there is sufficient liquidity, and an orderly aftermarket, in the shares of any Parallel Market listed entity on and following admission. For this reason, in particular, the minimum free float and minimum number of public shareholders requirements have been retained, albeit lowered (as opposed to being dispensed with altogether). This provides an interesting contrast to other alternative markets, such as AIM, that does not, for example, have a formal minimum free float requirement. 

Requirement for a Prospectus/Shareholder Circular

There will still be a requirement for the issuer to produce a prospectus (in the case of a new listing) or a shareholder circular (in the case of a capital increase). However, the disclosure requirements applying to a prospectus/shareholder circular for a Parallel Market listing are substantially less burdensome compared to the Main Market. For example, there is no requirement for a working capital statement or a management's discussions and analysis, both of which would be required in the context of a Main Market listing.

Interplay with other Implementing Regulations

The CMA's Offers of Securities Regulation, which regulates securities offerings in the Kingdom, will apply to any Parallel Market listing. However, to further relax the burden on prospective applicants, the CMA has provided that the recently introduced Book Building Instructions will not apply to a Parallel Market Listing, and that the provisions of the Corporate Governance Regulation will be "deemed indicative" only.


As the latest effort by the CMA to deepen the capital markets in Saudi Arabia, the introduction of the Parallel Market should be welcomed. It is likely that the less stringent regulatory framework for, and consequently the reduced time and costs associated with, such listings will attract SMEs (including those established elsewhere in the GCC) to undertake an initial public offering on the Parallel Market. As of 11 January 2017, the shares of a number of companies have already been admitted to listing, and it is hoped that this will act as a catalyst for further issuances and listings in the near future.

Originally published January 18, 2017

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions