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Financial Control announces the granting of a reconciliation period for the margin buying mechanism, which ends at the beginning of 2022

Dr. Islam Azzam, Vice President, announced Financial Supervisory AuthorityThe Authority directs to grant brokerage firms a period of regularization that ends at the beginning of 2022 Money bills To implement the new controls in the margin buying mechanism, noting that the new controls aim to increase the depth of margin buying on the Egyptian Stock Exchange by enhancing the benefit of a larger base of dealers in the margin buying mechanism and the use of the largest number of securities; To reduce the risk of concentrating margin purchases in a limited number of clients (investors) and on a limited number of companies’ securities listed per inch, which reduces the risks arising from the margin purchases that are made at the level of the market as a whole.

Islam Azzam, Vice President of the Financial Supervisory Authority
Islam Azzam, Vice President of the Financial Supervisory Authority

This came in a press release today, Tuesday, following the meeting of the Capital Market Advisory Committee at the Financial Supervision Authority, in the presence of the Egyptian Stock Exchange and the Central Clearing and Depository Company to discuss ways to reduce the risks of concentrated margin buying and set the executive and technical rules for the proposal of new controls for the margin buying mechanism, which were discussed. In a previous meeting with securities brokerage firms at the end of last week, in which it was agreed to invite the money market consultant to lay down their practical perception of the implementation rules in preparation for presentation to the Authority’s board of directors.

Azzam justified the need for new controls on margin purchases of securities, after they increased in light of the volume of margin purchases in the market amounting to about 6.5 billion pounds, and the concentration in margin purchases with a limited number of clients and a limited number of securities.

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The Vice President of the Authority noted that it was proposed to set maximum limits for transactions that take place by buying on margin at the level of each security as a percentage of free-traded shares or market capital, whichever is higher, as the attendees agreed that this percentage should be 25% of the shares that are free to trade or 15 % Of the market capitalization of the security, whichever is higher, as well as setting a ceiling on the size of the purchase with the allowable margin for each client and its related groups, so that 2% of the shares are free to trade for the security or for 1% of the size of the market capital of the security whichever is higher. Announcing the volume of margin purchases on every security and at the market level as a whole on the stock exchange screen periodically.

Islam Azzam confirmed that the reports indicate that 90% of the securities of listed companies that are dealt with by the mechanism of marginal purchase do not exceed 10% of the size of the market capital of the company, and 20% of the value of shares are free to trade, explaining that the application These controls and limits could reach the volume of marginal purchase at the level of the market as a whole to 75 billion pounds instead of 6.5 billion pounds, however, the degree of risks arising from dealing with marginal buying – at the market level – will be reduced due to the reduction of risks at the level of the customer and at the level of the paper. Financial.

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