The Egyptian Exchange (EGX) is planning to launch a new company that will specialize in trading financial derivatives, such as futures and options contracts. The new company will be a joint venture between EGX’s subsidiary, the Stock Exchange Holding Company, and other partners from the banking sector and the derivatives industry.
According to Ahmed Al-Sheikh, the Chairperson of EGX, this initiative aims to meet the growing demand for financial derivatives in the market and to attract qualified and experienced staff. He also said that a separate company for clearing and settlement services, called “Tawsiyat”, has already been established with a capital of EGP 100m. The company will handle the clearing and settlement operations for the contracts traded on the derivatives exchange.
In addition, EGX is in talks with the Central Bank of Egypt (CBE) to involve banks as settlement members and to secure their participation in the capital of the clearing company. EGX is also reaching out to brokerage firms to apply for a licence from the Authority to conduct derivatives trading activities.
Financial derivatives are financial contracts that derive their value from underlying assets, such as stocks, currencies, precious metals, or commodities. One type of financial derivative is a futures contract, which is an agreement between two parties to buy or sell an asset or commodity at a predetermined price and date in the future.
The first phase of launching the derivatives trading will include offering futures contracts on the main and seventy indices, followed by highly liquid stocks. The next phases will involve commodities precious metals, and options contracts.
Al-Sheikh stated that the market is waiting for the licensing of brokerage firms as trading members and banks as settlement members, after which the derivatives trading will commence.
