SFS: The future of securities finance in the Middle East
02 May 2025 Saudi Arabia
Image: Justin Lawson
With all the excitement and enthusiasm surrounding the burgeoning Saudi securities finance market at this year鈥檚 麻豆传媒 Finance Times Middle East Symposium in Riyadh, the panel entitled 鈥楴avigating the Future of Middle East 麻豆传媒 Finance鈥�, looked at some of the challenges the region faces, and what the next few years may have in store.
As the region as a whole pushes towards developing its capital markets, the Kingdom sees its Vision 2030, and the regulatory changes it has brought about over the past few years, in many ways driving the market, suggested Ross Bowman, global head of client management securities lending and repo at BNP Paribas鈥� 麻豆传媒 Services.
One interesting aspect in Saudi, Bowman noted, is that unlike many more established regions, where the secondary market drives activity, in KSA the primary market and IPOs have been generating interest and activity.
More broadly, international investment interest in the country is also growing. Alistair Griffiths, director of business development at the International 麻豆传媒 Lending Association (ISLA), highlighted the fact that 鈥榳hat is happening in Saudi?鈥� is one of the top questions he gets asked.
Though Saudi Arabia is seen as having a securities finance market in its infancy, its central bank and sovereign entities have been participating internationally for decades, making much of their inventory available for securities lending on a global basis.
Simon Lee, managing director and head of business development for EMEA and APAC at eSecLending, reiterated this point, noting that the Gulf has been a key region for his firm for many years, and continues to be the focus on a number of fronts.
Ruth Ferris, senior director and head of Secured Financing for Asia and head of Secured Financing sales EMEA at MUFG 麻豆传媒, emphasised that the success of securities financing across the Kingdom and the broader MENA region hinges on robust infrastructure, comprehensive systems and procedures, and a collaborative exchange of knowledge among onshore and offshore market participants to master the intricacies of the market."
Both this need for education and the importance of mobilising collateral was reiterated 鈥� from the agent lenders perspective 鈥� by Andrew Stephen, executive director, buy-side trading services at J.P. Morgan, who also succinctly summed up the attitude of the local market 鈥� 鈥淭he energy is palpable!鈥�
The topic of onshore versus offshore supply was also a key theme of the panel 鈥� offshore being more established via the Kingdom鈥檚 longer-running securities finance market, while onshore is a newer, burgeoning aspect that both KSA and international institutions are looking to explore.
The problem, highlighted by a number of panellists, is that these practicalities of having an established market, with infrastructure in place, means that ease and speed to market still make offshore supply more appetising than onshore.
As Lee put it, though in theory market participants may be neutral in terms of where supply comes from, practically the time to market is a key factor 鈥� which may mean offshore supply being advantageous, depending on the institution concerned.
Moving on to the future of securities borrowing and lending in Saudi, and the challenges that may be faced, the panel once again reiterated the need for education and local expertise 鈥� working with local partners as the linchpin when operating in KSA.
This education, highlighted Bowman, is a two way street 鈥� established international players have a lot to offer the Saudi market, but also have a lot to learn from local players on how to work with, and within, the Kingdom.
Shariah compliance, the panel agreed, was a prime example of where greater knowledge and understanding on the international front, would likely facilitate more interaction with markets in the Middle East.
Referencing best practices from the global market, Griffiths raised a key point 鈥� the Saudi market does not simply have to do exactly what other countries have done, but can instead pick the best of each that works for them.
This 鈥榖lank slate鈥� idea was touched on by a number of panels during the day. Whereas for much of the established securities finance markets globally, changing regulations and new technology are adopted within systems and structures that already exist 鈥� building on top of decades of prior laws, regulations, and once-new technologies that are now long-obsolete.
For Saudi Arabia however, and other markets in the Middle East, in many ways they are starting from scratch. There is no 鈥榣egacy debt鈥�. This means there is an opportunity for things to be set up with modern technologies and modern regulatory frameworks in-mind. Blockchain and distributed ledger technology, the panel indicated, is a perfect example where this could be the case.
Another area of potential opportunity 鈥� and one where Saudi is already differing from other markets 鈥� is the distribution of assets. What is effectively the retail market, noted one panellist, makes up a much larger proportion of supply in KSA than we see in established markets (though retail is growing elsewhere).
None of this process will be quick, and the Kingdom鈥檚 securities finance market still has a long way to go. As Bowman put it: 鈥淭his is a marathon, not a sprint.鈥�
As the region as a whole pushes towards developing its capital markets, the Kingdom sees its Vision 2030, and the regulatory changes it has brought about over the past few years, in many ways driving the market, suggested Ross Bowman, global head of client management securities lending and repo at BNP Paribas鈥� 麻豆传媒 Services.
One interesting aspect in Saudi, Bowman noted, is that unlike many more established regions, where the secondary market drives activity, in KSA the primary market and IPOs have been generating interest and activity.
More broadly, international investment interest in the country is also growing. Alistair Griffiths, director of business development at the International 麻豆传媒 Lending Association (ISLA), highlighted the fact that 鈥榳hat is happening in Saudi?鈥� is one of the top questions he gets asked.
Though Saudi Arabia is seen as having a securities finance market in its infancy, its central bank and sovereign entities have been participating internationally for decades, making much of their inventory available for securities lending on a global basis.
Simon Lee, managing director and head of business development for EMEA and APAC at eSecLending, reiterated this point, noting that the Gulf has been a key region for his firm for many years, and continues to be the focus on a number of fronts.
Ruth Ferris, senior director and head of Secured Financing for Asia and head of Secured Financing sales EMEA at MUFG 麻豆传媒, emphasised that the success of securities financing across the Kingdom and the broader MENA region hinges on robust infrastructure, comprehensive systems and procedures, and a collaborative exchange of knowledge among onshore and offshore market participants to master the intricacies of the market."
Both this need for education and the importance of mobilising collateral was reiterated 鈥� from the agent lenders perspective 鈥� by Andrew Stephen, executive director, buy-side trading services at J.P. Morgan, who also succinctly summed up the attitude of the local market 鈥� 鈥淭he energy is palpable!鈥�
The topic of onshore versus offshore supply was also a key theme of the panel 鈥� offshore being more established via the Kingdom鈥檚 longer-running securities finance market, while onshore is a newer, burgeoning aspect that both KSA and international institutions are looking to explore.
The problem, highlighted by a number of panellists, is that these practicalities of having an established market, with infrastructure in place, means that ease and speed to market still make offshore supply more appetising than onshore.
As Lee put it, though in theory market participants may be neutral in terms of where supply comes from, practically the time to market is a key factor 鈥� which may mean offshore supply being advantageous, depending on the institution concerned.
Moving on to the future of securities borrowing and lending in Saudi, and the challenges that may be faced, the panel once again reiterated the need for education and local expertise 鈥� working with local partners as the linchpin when operating in KSA.
This education, highlighted Bowman, is a two way street 鈥� established international players have a lot to offer the Saudi market, but also have a lot to learn from local players on how to work with, and within, the Kingdom.
Shariah compliance, the panel agreed, was a prime example of where greater knowledge and understanding on the international front, would likely facilitate more interaction with markets in the Middle East.
Referencing best practices from the global market, Griffiths raised a key point 鈥� the Saudi market does not simply have to do exactly what other countries have done, but can instead pick the best of each that works for them.
This 鈥榖lank slate鈥� idea was touched on by a number of panels during the day. Whereas for much of the established securities finance markets globally, changing regulations and new technology are adopted within systems and structures that already exist 鈥� building on top of decades of prior laws, regulations, and once-new technologies that are now long-obsolete.
For Saudi Arabia however, and other markets in the Middle East, in many ways they are starting from scratch. There is no 鈥榣egacy debt鈥�. This means there is an opportunity for things to be set up with modern technologies and modern regulatory frameworks in-mind. Blockchain and distributed ledger technology, the panel indicated, is a perfect example where this could be the case.
Another area of potential opportunity 鈥� and one where Saudi is already differing from other markets 鈥� is the distribution of assets. What is effectively the retail market, noted one panellist, makes up a much larger proportion of supply in KSA than we see in established markets (though retail is growing elsewhere).
None of this process will be quick, and the Kingdom鈥檚 securities finance market still has a long way to go. As Bowman put it: 鈥淭his is a marathon, not a sprint.鈥�
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