REGULATION WATCH- The EGX issued on Sunday the regulations allowing brokerage firms to act as market makers, allowing them to both buy and sell securities from their own inventory at prices they have a measure of control over, according to a statement (pdf). The tool is one of several financial instruments and trading options that will be made available on the EGX under amendments to the Capital Markets Act that were formalized last May. Under the regulations, brokerages are required to receive approval from the Financial Regulatory Authority (FRA) to act as market makers, after which they must register with the EGX before carrying out any transactions.

The regulations allow T+0 trading and margin trading on any EGX-listed securities. Prior to the issuance of these regulations, same-day trading and margin trading were only allowed on stocks that are on the EGX’s category ‘A’ or ‘B’ list of securities. The regulations also set the maximum difference between the buy and sell price of any security market makers trade. Market makers are also required to allocate the equivalent of at least 20% of a security’s average daily price on the EGX to act as collateral in order to be able to carry out the transaction.

A specialized EGX committee will determine which securities can and cannot be used in market making transactions. Ineligible securities include those belonging to companies that have faced legal action from the Financial Regulatory Authority pertaining to wrongdoing, or companies that have committed “grave violations” that prompted action from the EGX’s listing committee over the preceding six months.