Close-out netting in Saudi Arabia
1 July 2025 Close-out netting is a critical risk mitigation mechanism used globally in derivatives, repurchase agreements (repos), and other financial contracts. It allows parties to terminate all outstanding transactions upon an event of default and consolidate them into a single net payable or receivable.
As Saudi Arabia’s financial markets continue to grow particularly in repo and derivatives markets, aligning the legal framework for netting with global standards is essential.
It provides:
- Legal certainty for market participants (both domestic and international)
- Reduced systemic risk
- Enhanced market liquidity
Regulatory Developments
Two key regulatory bodies in Saudi Arabia are driving these reforms:
- Saudi Central Bank – SAMA: Published regulations to recognise the enforceability of close-out netting agreements.
- Capital Market Authority (CMA): Issued draft regulations further clarifying the enforceability and recognition of such agreements across capital market transactions.
These steps aim to align Saudi law with international best practices (e.g. EU Financial Collateral Directive, US Bankruptcy Code safe harbors), providing clarity that netting agreements will be enforceable even in insolvency scenarios.
More information from ISDA on close out netting here.
GMRA legal opinion for Saudi Arabia
ICMA - International Capital Market Association is actively supporting this process by commissioning a Saudi netting opinion specifically for the Global Master Repurchase Agreement (GMRA), the leading master agreement for repo transactions worldwide. The legal opinion will help give market participants and their compliance teams the assurance that repo transactions documented under the GMRA will be enforceable under Saudi law.
We expect this opinion to be published later this year.
Contact Information
If you’d like more information, you can contact: Deena Seoudy, ICMA
ICMA provides GMRA legal opinions for 73 jurisdictions worldwide, to find out more, see ICMA GMRA Legal Opinions.
