• Analysts: New mechanism for calculating stock closures that enhance investor confidence and attractiveness of the market


    *Abdul Aziz Al-Fakki from Dammam


    Financial analysts said that adjusting the mechanism to determine the closing price of the Saudi stock market and the parallel market "Nomu" from the mechanism of calculating the average price of the volume to the auction mechanism comes within the developmental steps in the market to increase the attractiveness.

    They said to Aleqtisadiah, the current mechanism is the most accurate in the global financial markets. It aims to unify the opening and closing mechanism of the market by applying the highest international standards that applied in the international financial markets, which enhances investor confidence in the market.

    They added that the new mechanism that is expected to start in the Saudi financial market "Tadawul" application today also provides greater freedom for investors to determine the closing price without the occurrence of manipulation of prices, which became exposed and controlled due to the regulations that are applied in the market.


    Mohammed Al-Shammimri, financial analyst, stressed that the new mechanism is more accurate and one of the most widely accepted mechanisms in the global financial markets. It is even better than calculating the average price at closing.

    He added that the mechanism takes into account requests and supply during the last ten minutes of market closure. He pointed out that the mechanism is closer to reality, as it will give the real closing price of the market.

    Therefore, it is better than the previous mechanism, which is the calculation of average transactions during the last quarter of the closing of the market.

    He emphasized that in the past, there was a major confusion in the lack of knowledge of the closure technically due to technical analysis of the market.

    He said that the last deal in the market is supposed to determine the closure and not the average price.

    This step will enable technical analysts to provide more accurate and clear reading of market developments, he said. Thus it would be giving more accurate forecasts to investors in the market.

    He pointed out that the new closing price system would be based on the asking price and offer of orders entered after the closure of the market that corresponds to the implementation of the market automatically, within ten minutes of closure.

    He explained that this means that if the last transaction in the market 100 riyals at the time of closing the market and enter the investor request at 101 riyals within the ten minutes following the closure, and enter another offer sale at 101 riyals will be the closing price instead of 100, taking into account 10 per cent for high and low.






    Abdul Aziz al-Fawaz, a financial analyst, said that the adjustment in the closing price mechanism would limit the fake buying and selling orders that were made before the market closed, which was quickly canceled by speculators and investors before the opening of the market in the following day. This makes the dealers build their decisions and expectations for the market based on these phantom orders.

    Al-Fawwaz added that the new mechanism will prevent the delusional offers in the market that were made at the close, where transactions were done after closing at a high price, and before opening these offers are canceled.

    He pointed out that traders who enter the market before the opening notice the offers that took place after the closure of the market and before opening the next day.

    Therefore, any investor is obliged to build the buying or selling operations on the price of the offers, which took place before the opening of the market, especially in the purchase orders.

    He pointed out that small investors are building their buying and selling decisions by the amount of offers made before the opening of the market, so the new mechanism will make the performance of the market more transparent and clear.


    "The new mechanism gives investors greater freedom to set the closing price, especially with 10 per cent regardless of what is trading in the market. Only deals worth more than 15,000 riyals should be executed," said a stock analyst who preferred not to be named.

    He pointed out that some might believe that there would be manipulation in the market, and this would not happen due to the controls and the regulations that have exposed and controlled the manipulations.

    He explained that the mechanism would have an impact in providing the technical analysts a technical reading based on high transparency of the market.

    This move would also address the buying, selling or fake orders that were made after the closing of the market, and would soon be canceled before the opening of the market the following day, which makes investors or traders build their decisions when entering the market.​

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