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In February 2026, Saudi Arabia implemented two major reforms to boost its ETF market. First, the Capital Market Authority (CMA) abolished the Qualified Foreign Investor (QFI) regime, eliminating asset thresholds that previously restricted foreign access to Tadawul. Second, the Saudi Exchange introduced an ETF Market Making Framework, offering licensed brokers and banks full daily fee waivers across exchanges and commissions, contingent on meeting specific obligations like spread limits and quoting speed. These measures aim to enhance liquidity and attract foreign capital, but their long-term sustainability remains uncertain.
The QFI abolition is a structural reform that permanently removes barriers to foreign investment, while the fee waiver acts as a temporary subsidy to incentivize market makers to provide liquidity. However, the subsidy model risks dependency, as market makers may exit if the waiver is removed before organic liquidity develops. This creates a critical question: can Saudi Arabia transition from subsidies to self-sustaining market dynamics without destabilizing spreads and order flow?
For traders, the reforms signal Saudi Arabia's commitment to deepening its capital markets. However, the success of these policies hinges on whether the ETF market can generate sufficient volume to make market-making profitable without subsidies. Investors should monitor Tadawul's liquidity metrics, foreign ownership trends, and CMA policy updates in 2027 to gauge the market's transition to self-sufficiency.
