EGX has issued a resolution 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
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.