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Monday, 20 January 2020

FRA committee suggests closing auction mechanism for EGX

REGULATION WATCH- FRA committee suggests closing auction mechanism for EGX share pricing: A proposal tabled by the Financial Regulatory Authority’s stock exchange advisory committee could see the EGX start conducting auctions to determine the closing price of shares, industry sources told Al Mal. As it stands, closing prices are calculated as the total value of transactions made on a given share divided by the absolute number of transactions made over the course of a day, or a weighted average.

The auction mechanism: If the proposed mechanism is adopted, the EGX would conduct a closing auction toward the end of the session in which it would receive buy and sell orders. The price set by the auction would override the weighted average calculated from the latest session price. At least five brokerages would need to place buy orders, and five sell, for the auction price to be accepted. If this condition isn’t met, the weighted average would become the closing price.

Background: Officials have been discussing changes to how closing share prices are calculated since 2018. There are several other scenarios that could include using the average price during the last hour of the trading day or only using the volume of trade, EGX boss Mohamed Farid said then.

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