RIYADH (Reuters) Saudi Arabia appointed yesterday board of directors for a state-owned company which will run the stock exchange, the largest in the Arab world, in a step towards a planned initial public offering.

The joint-stock firm Tadawul would be responsible for stock transactions, registration of ownership and publication of information about listed companies.

A cabinet meeting chaired by the Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz agreed yesterday on nine directors to run Tadawul for a three-year term, the official news agency SPA said.

The directors include two officials from the government, one from the central bank, representatives of four licensed brokerage firms and of two listed companies, including Saudi Telecommunications Co.

Saudi Arabia, the largest Arab economy, is moving toward developing a modern, transparent stock exchange after a crash last year erased more than half of its value and shook investor sentiment.

The government has not yet set a timetable for the sale of Tadawul, which will have a capital of 1.2bn riyals ($320m), wholly owned by the state Public Investments Fund.

Dubai’s stock exchange became the first in the Arab world to sell its own shares in a public and private offering last year, when the government of the emirate gave up a 20 per cent stake.

Like others in the Gulf Arab region, Saudi Arabia’s market has been tainted by allegations of insider trading and manipulation of stock prices.

The regulatory Capital Market Authority last year issued regulations to curb such practices and Tadawul introduced last month a new trading system designed to spot fraudulent transactions.