The Capital Market Authority has proposed a new regulatory framework to improve IPO practices, linking participation requests during the book-building phase with liquidity and the actual ability to pay, and enhancing the reliability of the information on which the offering price determination process is based.
The Authority presented the proposed regulatory provisions within the project to improve initial offering practices to the public and market participants to express their views and comments, and provided a period of 30 days to receive views and comments on the project, ending on October 22, 2026, with the proposed provisions, if approved, starting from November 2 of next year.
The project is of particular importance given the role that building the order book plays in pricing initial offerings. This mechanism depends on the requests and prices provided by the participating entities to form a picture of the level of demand for shares, which helps determine the offering price.
In 2022, the Authority introduced amendments to the instructions for building the order book and allocating shares, which included enhancing the responsibility of the financial advisor and relevant institutions in documenting and verifying participation requests, and the solvency of the participating parties and their ability to fulfill the value of the required shares.
The new project goes towards enhancing the reliability of this process, by ensuring that the requests submitted during the building of the order book reflect the liquidity actually available to the investor, thus reducing the gap between the recorded request and the real ability to pay, and supporting the quality of the inputs used in price discovery.
Tightening Tightening requirements for applications
The proposed regulatory provisions oblige the issuer’s financial advisor, and any other financial market institution related to receiving participation applications, to take further regulatory measures on the applications submitted during the construction of the order book, most notably verifying that the application value reflects the real liquidity available to the investor.
The provisions also limit verification of the financial solvency of applications submitted by participating entities to cash or quasi-cash, provided that such applications are obligated to be paid on the date of payment of the subscription value, as a maximum, in accordance with the time period specified in the prospectus.
These requirements aim to enhance the connection of orders registered during the building of the order book with liquidity or the actual ability to pay, in a way that supports the reliability of the record and its role in determining the offering price.
On the other hand, the proposed provisions enhance the underwriter’s role and responsibility from the book-building stage, by requiring the underwriting agreement to be signed and enforced before the book-building process begins, provided that the underwriter’s commitment to purchase all the offering shares becomes effective at the start of the process.
If the underwriter’s ownership of the offering shares leads to a breach of the requirements necessary for listing in accordance with the listing rules, the issuer’s shares will not be listed, with the underwriter committing to purchase all the offering shares.
Financial disclosures for a period of no less than one year
The proposed provisions also include enhancing the information available to investors, by requiring the issuer to disclose statements and future expectations related to its performance, including future indicators of financial performance for a period of no less than one year.
These requirements would provide a broader information base when evaluating the issuer and pricing the offering, rather than relying solely on historical data, supporting the price discovery process and the reliability of the order book.
The proposed provisions also oblige the issuer’s financial advisor to exercise the necessary professional care regarding future statements and expectations related to the issuer, including future indicators of financial performance, provided that these expectations are based on reasonable and measurable foundations.
The Authority believes that the proposed project would enhance discipline during the order book building phase, raise the efficiency of the offering and pricing process, in addition to clarifying and integrating the roles of the issuer, financial advisor, underwriter, and participating parties. It also aims to enhance the alignment of interests between relevant parties and raise the level of reliability of information available to investors, in a way that supports the efficiency of offering and pricing mechanisms.
If the project is approved, the Authority expects that the new provisions will contribute to raising the efficiency of capital allocation in the national economy, and improving the attractiveness of the Saudi financial market, by enhancing transparency and the efficiency of implementing initial offering operations.
The Capital Market Authority called on all interested parties and participants in the financial market to submit their views and comments during the survey period, stressing that all opinions received will be subject to study before adopting the final version of the regulatory provisions related to the project.
Views can be submitted through the unified electronic platform to poll the opinions of the public and government agencies affiliated with the Saudi Competitiveness Center (Poll), until October 22, 2026, provided that the provisions, if approved, will come into effect starting next November 2.
The European Central Bank said on Tuesday that the industrial transformation taking place in China is putting pressure on European companies and pushing them to lose their positions in global markets, especially in the machinery and transportation equipment sectors, noting that German companies are among the most affected.
China has strengthened its presence in global markets in recent years, with an increasing focus on industries with higher added value and technological production, thus competing with well-established European companies in many of the markets on which the continent’s economies depend for their exports.
The European Central Bank said, in an article published in its Economic Bulletin, that the European Union’s share of global merchandise exports has declined, especially in sectors and markets in which China has strengthened its international presence, most notably machinery and transportation equipment.
The analysis showed that Germany has the highest degree of similarity in the structure of its exports with China among the largest European Union economies, while Italy has the lowest degree.
In contrast, smaller countries such as Ireland and Greece were among the economies less exposed to Chinese competition.
The bank added that this reflects the escalation of competition in sectors that have been major drivers of growth in a number of European economies over the past decades, including the automobile and industrial machinery industries.
The pressure is not limited to European companies losing their market share in other countries, as China has also begun importing smaller quantities of European products as its local production expands.
The European Central Bank said that this decline appears more clearly in economies linked to European value chains in the manufacturing and automotive sectors, including Germany and a number of Central European economies.
The dollar witnessed sharp fluctuations on Tuesday, as it fell after recording its highest level in about two months, following the decline in oil prices following an Iranian proposal to reopen the Strait of Hormuz within 7 days if the United States eases its military pressure.
The US currency fell 0.12 percent against the yen to 157.15, while the euro stabilized without significant change at $1.146. The British pound fell 0.09 percent to $1.3356.
These fluctuations highlight the interconnected factors driving turmoil in foreign exchange markets, at a time when the outlook for global interest rates has been further complicated by the prolonged conflict in the Middle East.
The turmoil in the Strait of Hormuz has put pressure on global oil supplies and increased inflationary pressures, prompting investors to quickly reprice assets at any sign of changing expectations.
A senior Iranian official said, following a previous Kyodo News report, that Iran could reopen the strait within 7 days if the United States eases military pressure and lifts the blockade imposed on Iranian ports.
Brent crude futures fell below $99. Any sustained decline in oil prices would ease inflationary pressures and reduce the need to raise US interest rates, which could reduce the dollar's yield advantage over other currencies.
The dollar index, which measures the performance of the US currency against 6 major currencies, recorded a decline of 0.02 percent to 100.4, after touching earlier in the session its highest level since late July.
Factors putting pressure on the yen
Traders were also evaluating whether the Bank of Japan would raise interest rates at a fast enough pace to close the gap with other global central banks.
Although the Bank of Japan raised interest rates last week, the Japanese currency remained under pressure, as investors view the opposition expressed by two policymakers, who called for a more cautious pace, as an indication that implementing additional increases may be difficult.
Naomi Fink, chief global strategist at Amova Asset Management, said: “The central bank’s acceleration of its pace depends on how events develop, and the issue of determining the neutral and final levels of interest rates is still a matter of debate.”
Tighter statements from other global central banks have raised questions among traders about the yen's yield advantage, although the possibility of Tokyo's intervention has limited the dominance of bearish expectations.
Last week, European Central Bank President Christine Lagarde pushed back against investors' bets on sharp increases in interest rates, suggesting that a measured response from the central bank would be enough to contain inflation.
“European Central Bank officials have so far maintained a noticeably hawkish tone, leaving the option of an October rate hike firmly on the table,” wrote Francesco Pesoli, foreign exchange strategist at ING Bank.
He added: “However, investors seem more inclined to adopt the opposite scenario, which indicates more downward pressure on the euro-dollar pair in the near term.”
Markets are pricing in a roughly 30 percent chance that the Bank of Japan will raise its benchmark short-term interest rate to 1.5 percent in October, and a roughly 50 percent chance that the Federal Reserve will raise the federal funds rate range by 25 basis points to about 4 percent.
