Mohamed Farid, Chairperson of the Financial Regulatory Authority (FRA), has approved the executive rules submitted by the Misr for Central Clearing, Depository and Registry (MCDR), after coordination with the Egyptian Exchange (EGX), to settle the operations executed on corporate bonds listed on the EGX in the same trading session.
The step comes in response to the demands of investment bank officials and asset management companies in the Egyptian capital market, with the aim of activating the secondary market for corporate bonds and providing an incentive to deal on bonds listed on the Egyptian Exchange.
In the preamble of the approved executive rules, the clearing and settlement process for the operations that take place on corporate bonds listed on the EGX shall be carried out starting from the same trading day (T+0) when the cash balance in the account designated for that and the paper balance of the two parties to the transaction are available.
Farid clarified that the MCDR will receive trading operations in the same “Intra Day” session that take place on these bonds immediately after their implementation and in the same way as receiving operations that take place on shares allowed to be traded in the same session, bearing in mind that the settlement process for cash differences resulting from selling operations will take place all or part of what was purchased in the same session on bonds with the same controls in force for shares allowed to be traded in the same session.
Farid stressed that the brokerage companies, on the same day of implementation, verify that there is a cash balance in the account designated for that at the clearing bank sufficient to settle purchases, so that the entire purchase value is deducted from the cash balance available in the clearing bank, and in the event of selling again, the sale value is added to the same account.
He added that in the event that the brokerage company wants to sell all or part of what was purchased in the same session, the seller’s custodian must be notified of the process (the original sale process) to approve and send it so that it is allowed to seize from the balances of what was purchased in the same session (the sale system from today’s purchase).
Farid explained that the decision aims to eliminate the cost of interim financing for the period between trading and settlement, and then reduce the cost of trading on bonds.
The rules were issued in light of the issuance of the approval of the Board of Directors of the Authority by Resolution No. (82) of 2021 regarding the regulation of dealing on the bonds of companies listed on the Egyptian Exchange in the same “Intra Day” session, as well as the issuance of the approval of the Board of Directors of the Egyptian Stock Exchange in March 2021 to allow dealing in the same trading session on listed corporate bonds.
