On quiet market days, you might notice a small piece of news: “Execution of private deals” worth hundreds of millions. The news seems like a strong pulse in the market's veins, but the paradox is that these deals - despite their massive value - can pass without changing the closing price or index.
This is not a contradiction; rather, it is an important lesson in understanding market “mechanics”: not every trade printed on the screen reflects investor sentiment.

What is a “private deal” simply?

A private deal (referred to in regulatory literature in English as Negotiated Deal) is a trade that occurs when a seller and a buyer agree in advance on:

  • the security (stock/instrument)
  • the quantity
  • the price

The deal is then recorded in the market according to a designated mechanism and trading controls. This definition is repeated in market bulletins and regulatory materials.

The basic idea:
This is not a “bidding” within the open order book for everyone, but rather a regulated transfer of ownership between two parties who have agreed in advance.

Before we delve into our story, let’s clarify some terms:

  • Order Book: A place where buy and sell orders accumulate, from which the price is formed moment by moment.
  • Price Impact: The amount of pressure a large trade exerts on the price if executed in the open market.
  • Closing Price: The reference price that is often built through the closing auction/trading at the closing price.
  • Why do private deals not affect the closing price? Because “negotiated deals” do not enter the closing auction orders and do not affect the closing price according to market rules.

Why do investors resort to private deals?

Imagine an investor wanting to sell (or buy) a very large quantity. If executed through the order book:

  • the large sale may pressure the price down before completion
  • the large purchase may raise the price on the buyer while accumulating the quantity

The private deal reduces “disruption” and allows for executing a large quantity at an agreed price without creating an immediate price wave in the order book.

This explains why you see it common among:

  • portfolios and institutions
  • restructuring ownerships
  • transferring large stakes in a disciplined manner

The point that confuses people: How can it be worth hundreds of millions and not change the closing price?

The reason is regulatory/mechanical:
Private deals do not affect the closing price, as stated in the educational and regulatory materials related to the closing auction.
They also do not enter into the index calculations according to the market's index methodology.

However, they may appear in trading values because they add traded liquidity, even if they do not move the reference price.

A simplified numerical example: “A large number” does not mean “a new trend”

Suppose a stock is trading in the open market at 30 Riyals.
News emerged that there is a private deal on the same stock worth 60 million Riyals.

How could this happen?

  • Two parties agreed to transfer 2,000,000 shares × 30 Riyals = 60,000,000 Riyals
  • The deal was executed as a private deal

What changes?

  • The total trading value may increase because 60 million entered the traded liquidity.
  • But the closing price remains based on the closing mechanism in the open market (not on this deal).
  • And the index is not recalculated because it is not part of the trades approved for the indices.

So: A private deal may be more of a “transfer of ownership” than a “price vote” from the market.

When is a private deal a “significant signal”?

A private deal is not meaningless—but its meaning requires more precise questions. It becomes more significant when:

  1. It recurs on the same stock within close days
    This may indicate an institutional repositioning program (organized buying/selling).
  2. It comes with substantial operational news
    Such as strong results, a large contract, strategic change… here the “transfer of ownership” intersects with the “company story”.
  3. A clear price difference from the market appears
    If the deal was executed at a noticeable premium/discount to the trading price, it may signal special terms or a different valuation—but it requires caution in interpretation.
  4. It is followed by a change in open market activity
    If normal trading volumes rise after the deal, it may mean that the market “picked up” the message and started to react.

And how do we read the market when private deals rise?

How do we read private deals?
Read them as information about positioning and liquidity rather than a judgment on price direction. To turn news like “39 private deals worth 289 million Riyals” into practical understanding, follow the four-question rule:

  1. Did it recur on the same stock?
  2. Was its price close to the market price or far from it?
  3. Is there operational news justifying institutional interest?
  4. Did the normal trading behavior change afterwards?

If you answer these questions, you will move from reading the news as an exciting headline… to reading it as a tool to understand “who is moving in the market” and “why” without falling into the trap of quick interpretation.