ISDA Extends Saudi Arabia Netting Opinions

ISDA has extended its netting opinions for Saudi Arabia to cover regulations published by the Capital Market Authority (CMA) earlier this year that recognize the enforceability of close-out netting.

The CMA regulations were published in July, and follow similar rules published by the Saudi Central Bank (SAMA) in February. The CMA regulations apply if at least one party is a capital market institution supervised by the CMA, which includes dealers and investment managers. Both the CMA and SAMA rules are closely based on ISDA's 2018 Model Netting Act.

ISDA published netting opinions under the SAMA regulations in June. Those netting opinions - one under the ISDA Master Agreement and one for Islamic derivatives under the ISDA/International Islamic Financial Market Tahawwut Master Agreement - have now been extended to cover the CMA rules. Riyadh-based law firm STAT was commissioned by ISDA to draft the netting opinions.

ISDA is also developing collateral opinions under both regulations, which will be published before the end of the year.

"Thanks to this important step by CMA, ISDA's netting opinions now make clear that netting is enforceable for trades with any Saudi financial counterparty, whether an investment manager supervised by the CMA or a bank regulated by SAMA. This is a big step in the further development of Saudi Arabia's financial markets, and we would like to thank the CMA for its constructive engagement with ISDA and the industry throughout the development and consultation process," said Scott O'Malia, ISDA's Chief Executive.

ISDA has consistently advocated for enforceable close-out netting as a critical foundation of safe and efficient derivatives markets and has published netting opinions for 90 jurisdictions around the world. By allowing counterparties to reduce their obligations to a single net payment due from one party to another, netting significantly reduces credit risk. As of the end of 2024, the global gross market value of derivatives contracts stood at $17.6 trillion, whereas the gross credit exposure, which adjusts gross market values for legally enforceable bilateral netting agreements, amounted to $3.0 trillion, according to data from the Bank for International Settlements.

The ISDA netting opinions are available here.

For Press Queries, Please Contact:

Nick Sawyer, ISDA London, +44 20 3808 9740, [email protected]

Joel Clark, ISDA London, +44 20 3808 9760, [email protected]

Christopher Faimali, ISDA London, +44 20 3808 9736, [email protected]

Michael Milner-Watt, ISDA London, +44 20 3808 9777, M [email protected]

Nikki Lu, ISDA Hong Kong, +852 2200 5901, [email protected]