Riyad Capital
Abdullah Alshwer
22 April 2025
Abdullah Alshwer, PhD, CFA, CEO of Riyad Capital, sits down with Carmella Haswell to review the firm鈥檚 position in the Saudi market through its Securities Services business, and how a regulatory overhaul is influencing the Kingdom鈥檚 appeal to foreign investors
Image: Abdullah Alshwer
Riyad Capital has a prominent presence in Saudi Arabia鈥檚 securities finance market. How has the firm鈥檚 Securities Services business in the region evolved with the changing financial landscape?
Saudi Arabia鈥檚 financial landscape has evolved rapidly, underpinned by Vision 2030 and over 800 regulatory reforms implemented in recent years. The capital markets have become significantly more open, sophisticated, and investor-friendly 鈥� with foreign investors now accounting for 25 per cent of equity market trades.
The launch of the Post-Trade Technology Program, the adoption of derivatives like single-stock options and futures, and the introduction of the close-out netting regulation (effective as of February 2025) have modernised market infrastructure and enhanced investor protection. Within this context, securities lending has gained traction, with the first transactions beginning in 2021 and a lendable asset value of US$1.7 billion recorded by late 2023, alongside growing foreign participation and the adoption of ISO/SWIFT messaging for streamlined post-trade processing.
By virtue of being the largest custodian in Saudi Arabia and the wider region, Riyad Capital is inevitably a key player within the ecosystem.
Our Securities Services business provides a comprehensive range of high-quality, full-fledged services across custody, trustee, and fund services. The firm is also a Kingdom of Saudi Arabia (KSA) market leader in ETF custody services and provides Saudi direct, MENA regionally, and global custody, along with trustee solutions such as sukuk agency, registrar, and pledging services. This breadth of offering is backed by an in-house Securities Services team with a full-fledged operational services operating model, a team of seasoned experts, and advanced technology platforms that reflect the firm鈥檚 commitment to service excellence.
Our business has responded proactively to market shifts. We have also integrated with the central counterparty clearing house, Muqassa, and adopted post-trade technologies to ensure operational efficiency.
We launched My Asset Portal, a digital dashboard that allows clients to view their full portfolio and cash account positions in real time. The portal is built on robust security infrastructure and is continuously updated, ensuring clients have the latest insights at their fingertips. This empowers clients to view and explore their assets on a real-time basis.
Speaking of the changes facing the Middle East, what key developments in respect of SBL and derivatives markets are catching your attention?
We are seeing strong momentum in the Saudi market with continuous enhancements to the securities borrowing and lending (SBL) framework. Regulatory updates since 2017 鈥� particularly those in 2021-22 鈥� have allowed for relending, inclusion of non-qualified investors through agents, and straight-through post-trade processing, making the market more accessible to international participants.
On the derivatives front, Saudi Arabia鈥檚 introduction of options and futures products marks a major step in deepening market sophistication and expanding the range of investment tools available to investors. These developments, along with the growing use of global standards in trade and post-trade infrastructure, and collaborations with international custodians and triparty agents, are accelerating Saudi Arabia鈥檚 alignment with global markets practices and enhancing the liquidity and efficiency of the ecosystem.
How will these regulatory changes impact not only market infrastructure but also the influx of foreign investors in the region?
Saudi Arabia鈥檚 regulatory overhaul is significantly enhancing market infrastructure and, in turn, positively influencing the Kingdom鈥檚 appeal to foreign investors. The implementation of the Post-Trade Technology Program, flexible settlement cycles (T+0 to T+5), and the Close-out Netting and Financial Collateral Regulation (effective 17 February 2025) have aligned the market infrastructure with international standards 鈥� thereby reducing operational and credit risks while improving settlement efficiency and investor protection, particularly in times of counterparty default.
All of the regulatory enhancements introduced have translated into positive, tangible outcomes 鈥� not only at the Securities Services level, but the sector and the general business environment as a whole.
The securities lending market 鈥� supported by the introduction of agency lending models and increasing foreign participation 鈥� continues to mature, with about US$2.6 billion in lendable assets and US$370 million on loan as of August 2024.
Other positive outcomes include:
鈥� Qualified foreign investors (QFIs) accounted for 32.54 per cent of total equity market buys and 34.20 per cent of sells in March 2025, reflecting their significant role in trading activity.
鈥� Foreign ownership in Saudi equities stood at SAR 430.9 billion as of March 2025, representing 4.34 per cent of total market capitalisation and 11.23 per cent of free float ownership. This reflects steady international interest in the Kingdom鈥檚 capital markets.
鈥� Saudi Arabia issued 14,321 investment licenses in 2024, marking a 67.7 per cent year-on-year (YoY) increase. While not all are regional headquarters (RHQ) related, the surge reflects growing investor interest amid broader incentives, including those offered through the RHQ programme 鈥� such as a 30-year tax exemption and 10-year Saudization waiver.
How does Riyad Capital position itself within the custody market? Where do you see the market heading, and what growth opportunities are on the horizon?
By virtue of being the largest custodian in Saudi Arabia, Riyad Capital is a key player within the ecosystem. As of December 2024, the firm鈥檚 assets under custody (AUM) reached over US$220 billion 鈥� a more than 200 per cent increase YoY. This alone is testament to the resilience and efficacy of our service model 鈥� and, most importantly, the trust our clients continue to have in our offering and team.
The custody market in Saudi Arabia is trending toward greater institutional depth, supported by Vision 2030鈥檚 emphasis on capital market development and increasing foreign investor activity. Growth opportunities lie in scaling agency lending, expanding the repo market and advancing digital custody infrastructure.
How do you anticipate the Saudi securities lending market will develop over the next few years?
In terms of the growth trajectory, the securities lending market in Saudi Arabia is expected to expand steadily, supported by broader lending growth projected at 10 per cent annually, driven by regulatory reforms, increased foreign investor participation, and the implementation of Vision 2030 projects.
These factors are expected to enhance market accessibility and liquidity, fostering further development in securities lending.
For product diversification, the expansion into derivatives and other financial instruments will likely provide more opportunities for market participants.
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