ISDA publishes Saudi Arabia netting opinions 30 June 2025Saudi Arabia Reporter: Carmella Haswell
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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’s 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’s 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 — one under the ISDA Master Agreement and one for Islamic derivatives under the ISDA/International Islamic Financial Market (IIFM) Tahawwut Master Agreement.
Scott O’Malia, ISDA’s CEO, says: “The SAMA regulations mark a significant milestone in the development of a robust and efficient derivatives market in Saudi Arabia.
“The 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.”
The association states it has “consistently advocated” for enforceable close-out netting as a critical foundation of “safe and efficient” 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’s regulations, the Saudi Capital Market Authority (CMA) has published draft netting regulations that are closely aligned with SAMA’s 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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