The Securities Depository Center Company (Edaa) was established in 2016 as a closed joint stock company in accordance with the Saudi Companies Law, with an authorized share capital of SAR 400 Mn divided into 40 million shares, with a nominal share value of SAR 10, and it is fully owned by Tadawul.
Edaa aims to emulate capital market strategic objectives in relation to developing infrastructures and implementing resulting procedures to execute transactions in alignment with international standards. It also seeks to enhance the efficiency of securities deposit and registration services offered by the Securities Depository Center. This in turn will contribute to achieving the Vision 2030 goals through developing a more conducive environment that fosters excellence within all sectors related to the Capital Market.
The principal activity of Edaa is to operate and maintain the Depository and Settlement System (DSS), used to record and maintain securities and to register the ownership of securities in electronic format. Edaa also offers several additional services such as the management of issuers’ General Meetings (GM) including remote voting services (e-voting), reporting, notifications, and maintenance of critical core data. The types of securities that Edaa handles include equity, Debt, Sukuk and Bonds, ETFs, REITs, Mutual Funds, and CEFs.
There are a large number of initiatives in the Strategic Plan coming under the purview of Edaa. These include fund platform, international and regional CSD links, Repo, fee restructuring, and fund administration. All these initiatives are either already executed or on track to be executed according to the Plan.
Achievements in 2019
Expanding the reach
Edaa entered into agreements with both Bahrain Clear and Abu Dhabi Securities Exchange (ADX) to enhance bilateral cooperation with Bahrain and UAE financial markets. This was in-line with Edaa’s strategy of linking with other regional CSDs. These agreements will facilitate in allowing GCC issuers to cross-list on the Saudi Stock Exchange.
Edaa also signed a Memorandum of Understanding (MOU) with Euroclear Bank to establish cross-border links between the depositories and enhance access for international members to participate in Government Bonds through this link.
Services to issuers
An optional Dividends Distribution service (Paying Agent) was introduced whereby Edaa can distribute dividends on behalf of issuers through market members. This service will standardize dividend distribution procedures, reduce costs to issuers, and enable issuers and market members to access detailed reports and profit data as well as update their records through Edaa’s system.
Edaa’s Tadawulaty platform, continued to grow in scope during 2019, adding various features and enhancements to the platform. Through Tadawulaty investors (plus their proxies) cast their vote in General Meetings, streamlining the entire voting process.
Investors and market
Edaa contributed to the supporting functions for the inclusion into the Emerging Market Indices MSCI and FTSE Russell. The inclusion was smoothly managed through special measures taken for execution.
There were several significant developments regarding registry and custody services. Northern Trust, one of the major global custodians, became our first international custody member. The migration of accounts to Northern Trust and another newly activated custodian, J.P. Morgan was facilitated. An agreement was signed with Scopeer crowdfunding platform, to provide registry and custody services to the closed joint stock companies (CJSCs) funded through the platform.
Split voting was introduced for Qualified Foreign Investors (QFIs) and institutional investment was managed by several fund/asset managers to facilitate more flexibility in exercising their voting rights.
A large number of initiatives were also undertaken as part of preparatory work for the Aramco listings. For further information regarding Aramco listing please refer to Making History Together.
Edaa participated in events such as Biban (in Asharqia, Al Madina, and Jeddah) and the Financial Sector Conference. Emirates Securities and Commodities Authority (SCA), the Regulatory Authority for the UAEs financial markets, visited Edaa to obtain more information about Edaa services.
Opportunities and developments
- Edaa develops its systems to enable enhanced business services to be introduced through state-of-the-art technology and improved reporting services. These developments are aligned with many of the strategic initiatives and are being implemented accordingly.
- A fund platform is to be implemented which will enable new fund service offerings. This will facilitate subscription/redemption of fund units issued by different fund managers and will pave the way to introduce new products. The process will be supported by fund administration services to provide economies of scale to the fund markets.
- International CSD links will be developed to give easier access to international investors and create a single pool of liquidity for Saudi Government Bonds/Sukuks at Edaa.
- The securities borrowing and lending (SBL) framework is being enhanced to facilitate access and widen the participants eligible to participate in SBL transactions. The roadmap to introduce Repos (short-term dealing in government securities) has been drawn up.
- Given its current achievements and the capabilities it has demonstrated we can be confident that Edaa will meet any challenges the future may bring, and play an expanding role in the development of the Saudi Stock Exchange.