EGX Allows the Addition of the Investment Cash Funds as a Guarantee for the Margin Trading
14/11/2019
EGX has issued a decree allowing the addition
of the subscribed investment cash funds as a grantee for the marginal trading
this comes a step forward to activate the margin trading mechanism which
consequently will raise the market liquidity and will enhance the trading
environment.
The decision stipulates that "member entities
or companies of the Egyptian Exchange allowed to practice margin trading, as
well as receiving subscriptions to the cash investment funds subscribed to by
them, shall take these documents as collateral for the client's margin trading
through the same entity or company." The recipient of the subscription
shall be subject to the same conditions as list (A) of the specialized
activities lists, which allows these documents to be counted as a 100%
guarantee.
In addition, the market value of the document is
evaluated daily by the management company, so the document recovery can be
performed to liquidate the collateral and collect cash within one business day.
This comes after the approval of the Egyptian
Financial Regulatory Authority, complementing EGX’s efforts to further activate
the margin trading mechanism as one of the mechanisms that contributes to
increasing liquidity rates and activating trading in the market.
EGX held series of meetings with members of the
Egyptian Banks Union, especially banks that act as custodians to discuss
mechanisms to activate the role of banks in the purchase of securities through
margin trading.
In accordance with regulatory procedures, brokerage
firms or custodians are required to reassess the securities purchased by margin
at the end of each business day in accordance with their market value, if the
client's indebtedness exceeds 60% of its market value as a result of low
prices, he shall notify the customer of the reduction of this percentage either
by paying cash or offering cash guarantees.
Brokerage firms or custodians shall have the right
to take measures to sell securities and liquidate collateral provided by the
client to reduce his indebtedness, in case the client does not reduce the
indebtedness.