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Thursday, 8 February 2018

Amendments to the Capital Markets Act will allow private stock exchanges, short-term debt instruments

LEGISLATION WATCH- Is privatization of the EGX in the cards after the House Economics Committee okays regs allowing private stock exchanges? Or is it a commodities exchange that would be private? The House of Representatives’ Economics Committee agreed to amendments to the Capital Markets Act yesterday to allow the establishment of privately-owned stock exchanges. Private exchanges, which would fall under article 26 of the act, would be established as joint stock companies and allowed to trade in or two types of securities at most, only after obtaining approval from Cabinet based on a recommendation from the Financial Regulatory Authority (FRA), according to Al Mal. Private exchanges would face licensing fees of no more than EGP 100k, and the regulations on shareholders, capital requirements, board members, and management structure would fall to Cabinet to set, presumably via executive regulations. The new exchanges’ financials would also have to be monitored by FRA-sanctioned personnel.

Other amendments will permit new instruments, toughen sanctions: Among the new instruments could be sukuks, futures, and a commodities exchange.

Will FRA include short-term debt instruments as part of Capital Markets Act amendments? Other amendments to the Capital Markets Act now under study by the committee could see the introduction of short-term debt instruments. The FRA had reportedly suggested including provisions to allow for the issuance of short-term bonds, ranging from seven days to two years, at the hearing held yesterday on the law, Youm7 reports. It is unclear whether this is a proposal for future amendments after the current ones are passed or whether FRA is trying to include a last minute change to the act. FRA had hoped to begin allowing the issuance of short-term instruments before the end of 2017. The move aims to facilitate financing of SMEs, particularly those whose products and services are seasonal, officials had previously suggested

Tension between the bourse and the FRA? Disagreements with FRA Chairman Mohamed Omran over lowering the EGX’s listing fees reportedly led deputy bourse chief Mohsen Adel to abruptly leave in the middle of yesterday’s discussion session. The Economics Committee had proposed lowering listing fees to EGP 50,000 on bonds and EGP 250k instead of EGP 500k on securities, which Al Mal says did not sit well with Adel.

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