Peninsula - 25/5/2006

Saudi Arabia's stock exchange Tadawul awarded a 160m riyals ($42.7m) contract to Nordic bourse operator and technology group OMX for a new trading system to boost transparency and efficiency.

"Under the terms of the contracts, OMX will be the primary system integrator for the design, implementation and infrastructure of the Saudi Stock Market Tadawul," OMX said in a statement.

The deal, signed yesterday in the capital Riyadh, follows a crash which has wiped off more than half of the Arab world's largest bourse's capitalisation since late February.

Abdulrahman Al Tuwaijri, head of bourse watchdog the Capital Markets Authority (CMA), told reporters after the signing ceremony that the new trading system would start operating 11 months from now.

The contract provides for platforms for trading and market data dissemination, a market surveillance system and the integration of a central securities depository from Tata Consultancy Services.

The number of retail investors in the kingdom has risen from 50,000 in 2002 to some 4 million on the back of abundant liquidity and the rush for a quick profit in the market, which surged 600 percent between 2002 and 2005.

"The number of transactions rose from 605,000 in 2001 to 46 million in 2005," said Tadawul manager Abdallah Al Abdulkader.

The existing trading system has several times been blamed by Saudi officials for glitches that have hit the market over the past year.

"The new system aims at protecting investors and developing the market," the Tadawul manager added.

Magnus Bocker, OMX Chief Executive Officer, said his firm's partnerships with other stock markets helped them develop and "become more transparent".

The Saudi bourse's chief regulator said he had no magic wand to restore confidence in the ailing market, which would require "huge efforts and cooperation" from all parties.

"We don't have a magic wand," Tuwaijri told reporters.

"Restoring confidence requires huge efforts and cooperation from everybody ... Restoring confidence comes when people feel that this market has to be dealt with just as it is," he added.

Market watchers have been eagerly awaiting Tuwaijri, whose appointment around two weeks ago sparked a sharp but short-lived rebound, to unveil plans to restore confidence in the Arab world's largest bourse after a crash eroded half of its capitalisation since late-February.

He did not say what he had in store for the market, which rose more than 4 percent since Tuesday on speculation over what he may announce today.

"We are getting a lot of proposals from citizens," he said, citing merging the two-session trading day into one.

Tuwaijri declined to offer clear answers to journalists' questions about the reason behind the crash, which analysts say was a belated correction worsened by a power struggle between major speculators and CMA's former chief, a controversial figure who tried to stamp his authority over the opaque market.