FRA issues 6 recommendations to revitalize Egyptian Stock Exchange

CAIRO – 17 November 2021: The Financial Regulatory Authority (FRA) held a meeting to discuss ways to enhance the trading environment and controlling transactions in the Egyptian Stock Exchange.

According to the meeting, the FRA issued six recommendations which include:

1- Recommending submission to the authority’s board of directors to consider granting an additional period to implement the authority’s decision regarding margin purchase rules until the completion of the electronic systems, with the application of the new rules relating to margin until the Misr for Central Clearing, Depository and Registry (MCDR) completes the preparation of automated systems.

The deadline has been set for a maximum of six months, provided that the brokerage firms abide by the rules of margin buying in force in accordance with the decisions regulating this, emphasizing that the new rules related to margin will not result in any liquidation of existing positions at the start of the application.

2- Emphasizing the stock brokerage companies and custodians of the necessity of studying the solvency and the degree of risk of the securities subject to the margin purchase and all guarantees and following the principles of risk management in order to reduce the degree of risks to the client and the security alike.

3- Studying the proposal submitted by the Stock Exchange regarding the rules of margin buying at the level of the brokerage company and the values ​​of the guarantees provided by the securities.

4- The Authority will complete discussions with the Stock Exchange regarding price limits, in particular on shares with high risks and unusual price fluctuations, and consider the possibility of setting different price limits for them, and the extent to which they can be reduced on some shares according to the rate of risk of price fluctuations and the percentage of margin purchases on them.

5- The Egyptian Stock Exchange will study adjusting the closing price to be associated with a minimum execution value in addition to the time component.

6- Professional societies call for a meeting of brokerage firms and custodians to activate the role of risk management when granting financing for the purchase of margin securities and activate the role of their internal control.

The FRA meeting was held this afternoon at the headquarters of the Authority in the Smart Village, headed by Islam Azzam, Vice-President of the Authority, and in the presence of the Chairman and Vice-President of the Egyptian Stock Exchange, and the two managing members of the Misr Clearing Company with members of the Capital Market Advisory Committee.

Mohamed Omran, Chairman of the Financial Regulatory Authority, participated in some of the aforementioned discussions to discuss the developments that the Egyptian Stock Exchange is going through.