CME-1 Equity Markets 2 — Questions and Answers
Question 1: What is a Rights Issue (Haq Al-Awalawiya) in the Saudi capital market?
- A new listing on Tadawul
- An offering of new shares to existing shareholders at a discounted price (Correct answer)
- A government bond issuance
- A share buyback program
Correct answer: An offering of new shares to existing shareholders at a discounted price
A Rights Issue allows existing shareholders to purchase additional shares proportional to their current holdings at a discounted price. In Saudi Arabia, these rights are tradeable on Tadawul during the subscription period.
Question 2: What is the minimum number of shareholders required for a company to list on the Main Market of Tadawul?
- 50 shareholders
- 100 shareholders
- 200 shareholders (Correct answer)
- 500 shareholders
Correct answer: 200 shareholders
Companies seeking to list on the Main Market must have at least 200 public shareholders at the time of listing. This requirement ensures adequate distribution and liquidity of shares.
Question 3: How are dividends typically distributed to shareholders of Saudi-listed companies?
- Only in the form of additional shares
- Through the Tadawul Depository Center (Edaa) (Correct answer)
- By direct bank transfer from the company
- Through postal cheques only
Correct answer: Through the Tadawul Depository Center (Edaa)
Dividends are distributed through Edaa, the Securities Depository Center Company, which manages the deposit, transfer, settlement, clearing, and registry of securities ownership in Saudi Arabia.
Question 4: What does the term 'Sukuk' refer to in the Saudi capital market?
- Common shares of a company
- Islamic financial certificates similar to bonds (Correct answer)
- Mutual fund units
- Foreign currency derivatives
Correct answer: Islamic financial certificates similar to bonds
Sukuk are Sharia-compliant financial certificates that represent ownership in an underlying asset, usufruct, or investment. They function similarly to bonds but comply with Islamic finance principles that prohibit interest (riba).
Question 5: What is the role of the Listing Authority in Saudi Arabia?
- It manages day-to-day trading operations
- It reviews and approves applications for listing securities on Tadawul (Correct answer)
- It sets monetary policy
- It regulates the banking sector
Correct answer: It reviews and approves applications for listing securities on Tadawul
The CMA's Listing Authority is responsible for reviewing listing applications, ensuring compliance with listing rules, and approving or rejecting applications for listing on the Saudi Exchange.
Question 6: What is the Saudi Exchange's pre-opening session used for?
- Executing market orders at any price
- Collecting orders to determine the opening price through an auction mechanism (Correct answer)
- Allowing only institutional investors to trade
- Processing dividend payments
Correct answer: Collecting orders to determine the opening price through an auction mechanism
The pre-opening session (8:00-10:00 AM) collects buy and sell orders to determine the opening price through a call auction mechanism. This helps establish a fair opening price based on supply and demand.
CME-1 Equity Markets 2
What is a Rights Issue (Haq Al-Awalawiya) in the Saudi capital market?