International Swaps and Derivatives Association extends Saudi Arabia netting opinions to cover Capital Market Authority close-out netting rules

The International Swaps and Derivatives Association (ISDA) has extended its Saudi Arabia netting legal opinions to cover regulations issued by the Capital Market Authority (CMA) that recognise the enforceability of close-out netting. The update is intended to clarify enforceable netting for trades involving CMA-supervised capital market institutions, alongside existing coverage for Saudi Central Bank (SAMA) regulated entities. The CMA regulations, published in July, apply where at least one party is a CMA-supervised capital market institution, including dealers and investment managers, and follow similar close-out netting rules published by SAMA in February. Both frameworks are closely based on ISDA’s 2018 Model Netting Act. ISDA’s existing opinions under the SAMA regime, one for the ISDA Master Agreement and one for Islamic derivatives under the ISDA/International Islamic Financial Market Tahawwut Master Agreement, have been extended to cover the CMA rules, with Riyadh-based law firm STAT commissioned to draft the opinions. ISDA also pointed to the credit-risk benefits of legally enforceable netting, citing Bank for International Settlements data showing global derivatives gross market value of USD 17.6 trillion at end-2024 versus gross credit exposure of USD 3.0 trillion after adjusting for enforceable bilateral netting. ISDA is developing collateral opinions under both the CMA and SAMA regulations, which it expects to publish before the end of the year.