The International Swaps and Derivatives Association (ISDA) Endorses the Alignment of the Close-out Netting Regulation with International Standards

The ISDA endorsed the Close-out Netting and related Collateral Arrangements Regulation adopted by the Capital Market Authority (CMA), which came into effect in July 2025, confirming its alignment with international standards.

According to a statement published on ISDA's website, the Regulation adopted by the CMA was included within the scope of ISDA's legal opinions consistent with international derivatives agreements, signifying that the Kingdom of Saudi Arabia has become a jurisdiction supporting international netting legislation, strengthening the enforceability of such contracts at the international level.

Mr. Raed Ibrahim Alhumaid, CMA Deputy of Market Institutions, explained that the Regulation approved four months ago was designed to regulate netting agreements and related financial collateral arrangements involving a Capital Market Institution. It aims to enhance the stability of the financial system and protect investors, contributing to the growth of investments in the capital market, including the derivatives market.

He noted that it was approved and implemented to ensure the enforceability of eligible financial contracts and their protection against subsequent changes in the circumstances under which they were executed, including the initiation of bankruptcy proceedings. It also guarantees the enforcement of the terms and provisions contained in such contracts in the event of default by either party, thereby safeguarding the rights of all parties involved. This comes in light of ISDA's issuance of various guidelines and templates aimed at strengthening netting practices.

He affirmed that CMA continuously reviews and develops the rules and regulations governing the capital market to enhance its attractiveness, noting that ISDA's endorsement of the Close-out Netting and related Collateral Arrangements Regulation with global practices is a positive step toward strengthening confidence in the Saudi market and reflects CMA's alignment with international standards in this regard.

Scott O'Malia, ISDA's Chief Executive, stated that the adoption of the Regulation by CMA has enabled ISDA's netting opinions to clearly confirm 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. He described this as a big step in the further development of Saudi Arabia's financial markets and expressed his appreciation to the CMA for its constructive engagement with ISDA and the industry throughout the development and consultation process.