ISDA publishes Saudi Arabia netting opinions
30 June 2025 Saudi Arabia
Image: Mohammed/stock.adobe.com
The International Swaps and Derivatives Association (ISDA) has published new legal opinions that recognise the enforceability of close-out netting under Saudi Central Bank (SAMA) regulations.
SAMA鈥檚 netting regulations were published in February, meaning all G20 jurisdictions now recognise the enforceability of close-out netting.
The regulations, which are closely based on ISDA鈥檚 2018 Model Netting Act, apply if at least one party is supervised by SAMA, which includes banks and non-banking financial institutions supervised by the Saudi Central Bank.
Riyadh-based law firm STAT was commissioned by ISDA to draft the netting opinions 鈥� one under the ISDA Master Agreement and one for Islamic derivatives under the ISDA/International Islamic Financial Market (IIFM) Tahawwut Master Agreement.
Scott O鈥橫alia, ISDA鈥檚 CEO, says: 鈥淭he SAMA regulations mark a significant milestone in the development of a robust and efficient derivatives market in Saudi Arabia.
鈥淭he ISDA netting opinions will give firms enhanced certainty and confidence to trade derivatives with Saudi counterparties regulated by SAMA, encouraging more participation and increasing the depth and liquidity of Saudi capital markets.鈥�
The association states it has 鈥渃onsistently advocated鈥� for enforceable close-out netting as a critical foundation of 鈥渟afe and efficient鈥� derivatives markets.
By allowing counterparties to reduce their obligations to a single net payment due from one party to another, ISDA says netting significantly reduces credit risk.
In addition to SAMA鈥檚 regulations, the Saudi Capital Market Authority (CMA) has published draft netting regulations that are closely aligned with SAMA鈥檚 rules, which will cover other financial market participants, including asset managers and infrastructure providers.
The ISDA netting opinions will be extended to cover the CMA rules when they are finalised.
SAMA鈥檚 netting regulations were published in February, meaning all G20 jurisdictions now recognise the enforceability of close-out netting.
The regulations, which are closely based on ISDA鈥檚 2018 Model Netting Act, apply if at least one party is supervised by SAMA, which includes banks and non-banking financial institutions supervised by the Saudi Central Bank.
Riyadh-based law firm STAT was commissioned by ISDA to draft the netting opinions 鈥� one under the ISDA Master Agreement and one for Islamic derivatives under the ISDA/International Islamic Financial Market (IIFM) Tahawwut Master Agreement.
Scott O鈥橫alia, ISDA鈥檚 CEO, says: 鈥淭he SAMA regulations mark a significant milestone in the development of a robust and efficient derivatives market in Saudi Arabia.
鈥淭he ISDA netting opinions will give firms enhanced certainty and confidence to trade derivatives with Saudi counterparties regulated by SAMA, encouraging more participation and increasing the depth and liquidity of Saudi capital markets.鈥�
The association states it has 鈥渃onsistently advocated鈥� for enforceable close-out netting as a critical foundation of 鈥渟afe and efficient鈥� derivatives markets.
By allowing counterparties to reduce their obligations to a single net payment due from one party to another, ISDA says netting significantly reduces credit risk.
In addition to SAMA鈥檚 regulations, the Saudi Capital Market Authority (CMA) has published draft netting regulations that are closely aligned with SAMA鈥檚 rules, which will cover other financial market participants, including asset managers and infrastructure providers.
The ISDA netting opinions will be extended to cover the CMA rules when they are finalised.
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