Morgan Stanley Halts Market Making on 25 Tadawul Stocks

The Saudi Exchange approved Morgan Stanley’s request to terminate its market-making activity for 25 listed companies, effective June 17, the exchange said in a statement. The roster includes National Building and Marketing Co., Anaam International Holding Group, Digital Research Co., and more than a dozen other names spanning construction, medical services, IT, and industrial sectors. Many of the affected firms are small-cap or micro-cap listings that joined Tadawul in the past two years.

The move removes a major liquidity provider from some of the exchange’s thinnest stocks. Under Tadawul’s market-making rules, designated participants must post continuous two-way quotes during trading hours. That commitment helps narrow bid-ask spreads and gives institutional investors confidence to build positions. Without that backstop, the same stocks could see wider spreads and lower trading volumes – a shift that matters most for the smaller names where Morgan Stanley was the sole dedicated market maker.

For traders who hold these names, the effective date matters. After June 17, execution quality will depend on whatever natural order flow fills the gap. Some of the companies may seek a replacement market maker, a process that requires Tadawul approval. The exchange did not name a successor or indicate whether any of the 25 firms had already lined up a new provider.

The withdrawal comes at a time when Tadawul has been expanding its market-making framework to attract foreign institutional participation. Introduced in 2021, the program initially focused on large-cap stocks, then gradually extended to mid and small caps. Morgan Stanley was one of the early participants. Its exit from these 25 names does not affect its market-making obligations for other Tadawul-listed stocks.

Investors who follow the affected names will want to watch trading volumes and spreads in the week after the change takes hold. A sudden drop in daily turnover or a persistent widening of quotes would confirm that the liquidity gap is significant. The opposite – steady volumes and tight spreads – would suggest that other participants are filling the role informally.

Companies on the list include National Building and Marketing Co., Anaam International Holding Group, and Digital Research Co., alongside Taqat Mineral Trading Co., Saudi Lime Industries Co., and MOBI Industry Co., among others. Most trade at low valuations relative to the broader Tadawul index, and some have limited free float. That combination already made them sensitive to liquidity shocks before Morgan Stanley stepped away.

The decision is Morgan Stanley’s own, the exchange said. Tadawul approved the request without comment on the reasons.