Same-day trading launched for Egypt stock markets

The Cairo and Alexandria Stock Exchange (CASE) yesterday announced that it would adopt a new system, which is expected to add much to the rating of the Egyptian stock market.

"Same-Day Trading", approved by Egypt's Capital Market Authority (CMA) allows the selling of securities traded that same day.

The new system was hailed by CMA chairman Hani Serri-Eddin, saying it would "benefit all parties involved, generate flexibility, and protect investors and activity for the broker."

CASE chairman, Maged Shawky made the announcement of the new mechanism during a press conference at CASE premises yesterday.

Addressing the conference, Shawky said that introducing the new system is a part of constant efforts to upgrade performance at the Stock Market.

He added that the new system had been approved by CMA following detailed discussions.

The decree by CMA provides that the CASE and Misr For Clearing, Settlement, and Central Depository (MCSD) would be entrusted with the devising of executive procedures for the new system, each within its own domain.

Shawky said that under the new system, securities would be traded through a brokerage that will have to obtain approval from the CMA.

The company will then have to deposit at least LE.5 million in the clearing bank as a deposit for settling transactions.

The company will have to inform their clients of the potential risks. CASE must have a copy of the contract signed between the brokerage and the client.

Same-Day Trading means that an investor buys securities and can sell them "during the same trading session." Shawky made it clear the new system only applies to CASE-registered securities, to which the set criteria apply, noting that these securities would be shown on the trading screen at the opening of trade.

One important aspect of the new system is that the brokerage can only trade over 1/10,000 (one in ten thousand) of its securities registered on the Stock Market.

After the day's trading, the Clearing Company will inform CASE of the total volume of each of the broker's transactions.

The CMA stressed that it would intervene in time to stop a brokerage from trading under the umbrella of the new system when necessary for the stability of the market and the protection of traders and clients.

Chairman of the Egyptian Securities Association Mohamed Taymour told the press conference that the new system has its rules, adding that one significant aspect is that the system is "so flexible" and is liable to be modified according to the results of the application process.

"Modifying the system can now be done through the CMA.There is no need for a ministerial decree," he said.

MCSD chairman Mohamed Abdul-Salam told the conference the Same Day Trading was not new to the Stock Market, for it had been applied at the CASE but, for certain reasons, was skipped in 1999.

He noted that the system would be "a great shift for the Egyptian Stock Market.... According to the new system, a customer can get the results of trading by the end of the day, either profits or loss."

He said that the new tool would help enhance liquidity on the market.

"Clearing and settlement have to be done the same day, and not tomorrow, otherwise it has to wait for the normal settlement date."

He noted that relevant brokerages should have the financial and technical capacity.

"A broker operating under the new mechanism should be able to give their clients details of the system and the risks involved in order to attain the highest degree of security....The client has the final word on whether to invest or not."

He added the talk about "risks" does not at all mean that the new system is some sort of threat, " but the client has to know all the details before making a decision."

As for how much liquidity is expected to increase after the application of the new mechanism, the CASE chairman said that he could not tell for sure but at least it would double.

He also underscored the need for confidentiality to protect investors. bdul-Salam spoke of control procedures by CASE to maintain stability.

Shawky also noted that there are many other stock markets in the Arab region applying the system and "this is why their volume of trading and activities is much bigger than ours."