Operacionalización de la Matriz de Organización e Interpretación de la

The origins of the ASX date back over 100 years inseparate exchanges in each of the Australian states. The ASX was formed in 1987 when the Australian Parliament designed legislation to merge the six state securities exchanges (New South Wales, Queensland, Western Australia, South Australia, Tasmania, and Victoria). The amalgamation expanded to the Sydney Futures Exchange in 2006 to include its operations under the name of Australian Securities Exchange (ASX 2016a). Meanwhile, the Federal Government announced that securities would be under its legislative control (Fischer 1988). In order to became global, the ASX has joined the two best market indices, Standard & Poor's (S&P) and Morgan Stanley since 1999 (Steen & Kendall 2005). The amalgamation played the role to put Australia in the world standard which encouraged foreign investors to the Australian market as well as helped the local investors to compare their own market to the world market. In fact, it is highly likely

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that such opening the market to world standards contributed to increasing transparency in the investment process. Currently, the ASX is considered as one of the world's top-10 listed exchange groups in terms of market capitalization and is one of the most active share markets (ASX 2016a). There were 2205 listed companies based on the ASX report issued on 4 of May 2016.

The major function of the ASX is to raise large amounts of funds for companies or government and facilitate investment operations for stock exchange market investors (Fischer 1988). The ASX is divided into 14 sectors: all Ordinaries Gold, Consumer Discretionary, Consumer Staples, Energy, Financial, Health Care, Industrials, Information Technology, Materials, Metals and Mining, Resources, Telecommunications Services, Utilities, and Banks (ASX 2016c).

Large overseas companies can be listed in the Australian stock exchange if they are listed on the stock exchange market in their home country and do not controlled by local company rules, thanthe Australian stock exchange will not allow these companies to be included. There are about 70 foreign companies listed on the Australian stock exchange (ASX 2016b).

As with other stock exchanges, shares trading has similar approaches begin with customers dealing through brokers to buy and sell specific stock. Since1962, this approach has been replaced by the post system that deals with trading in official hours. When the ASX settled down in 1987, trading in shares moves to computer screens (automatic system) which was fully extended to all stocks in 1990, known as Stock Exchange Automated Trading System (SEATS) (Renton 2004; Steen & Kendall 2005). To access SEATS, investors must have a formal agreement with a licensed stockbroker (Steen & Kendall 2005). It is important to note that these brokers became known as

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participating organisations. Nowadays, any investor who seeks to trade on the stock exchange market needs to select one of these organisations that are fully responsible for transferring ownership in accordance with the Financial Services Reform Act 2001.It is germane to say that there are more than 80 of these organisations in the six state capitals and clients are able to obtain the list from the stock exchange market (Renton 2004).

In terms of the investors’ types, there are three types of investors in the ASX: Australian households, Australian institutional investors and foreign investors (ASX 2013). The ASX statistics showed that the end of 2012 the Australians owned 38% of the total market either directly or indirectly (ASX 2013). In terms of foreign investors, in 2007 they constituted around half of the investor base of Australian equities and bonds. They also accounted for around one-third of the investor base in the Australian stock exchange market (Black & Kirkwood 2010). In 2009 the shares value of foreign investors in the ASX exceeded $400 billion and kept rising until 2014 accounting for over $1000 billion weighted in average price (Bradraniaa et al. 2006). Based on the most recent statistics of the ASX in 2012, foreign investors owned around 41% of the total market (ASX 2012), which indicates that they represented a high rate of the total market. According to the Business Council of Australia (2014), foreign investment stock as of 30 June 2013 was estimated at $AUD 2.46 trillion which is over 50% of Australia’s total capital stock estimated at $AUD 4.82 trillion. The Business Council of Australia has also confirmed that it will continue to attract more foreign investors in the future.

4.11 Conclusion

This chapter aimed to provide an overview of the Saudi legal system and the relationship between Islamic and civil laws. The development of the Saudi capital

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market has increasedconsiderably in recent years in order to meet the needs of global trading. The chapter explored the role of investors in the stock exchange market and provided some details of foreign investment in each stock exchange market. It argued that a clear view about the Saudi legal system may assist both local and any type of foreign investors particularly in the stock exchange. This chapter also described the Saudi listed companies and provided more detailsof the type of ownershipbased on the last updated statistics and highlighted the percentage of foreign investors’in particular. Last but not least, this chapter examined the history of stock exchange markets in general and the history of foreign investment in particular in neighbouring GCC countries and in Australia. The development of those markets has led to a great increase in foreign investors which indicates that flexible rules, lengthy experience in the stock markets and a strong economy may encourage more investors. Also, there is a global uptrend in international investment. The following chapter will present the methodology for testing the Saudi rules for foreign investors in terms of its effects on the local stock exchange market and the extent of protection of shareholders.

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Chapter 5

The Attraction of the Rules for Foreign Financial Institutions

Investment in the Saudi Listed Securities

5.1 Introduction

In considering of the aim of the CMA to attract foreign investors to the local stock exchange, the purpose of this chapter is to study and evaluate the level of attraction. The analysis is supported by unpublished data that has been provided by the CMA in Saudi Arabia. This data is supplemented by recent statistics of foreign investment flows to the Saudi stock exchange market. The chapter also aims to examine the extent of the attraction comparing between the original and amended copies of Qualified Foreign Investment Rules as well as the regulations in the GCC countries and Australia.

The chapter is divided into 12 sections. Section 5.2 discusses the influence of rules on attraction of foreign institutional investment. Section 5.3 analyses the important feedback on foreign investment regulations and section 5.4 examines the amendments in Qualified Foreign Investment Institutions Regulations. Section 5.5, 5.6 and 5.7 address respectively the tax requirements, short-selling activity and money transfer procedures in and out the Kingdom. Section 5.8 analyses the period after opening up of the Saudi Stock Exchange for foreign investment. The procedures and regulations of other GCC countries will be discussed in the section 5.9 and their significant differences from other countries will be examined in section 5.10. The Australian regulations will be conserved in section 5.11. Finally, section 5.12 will conclude the chapter.