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Wednesday, 26 August 2020

EGX to purchase 30% of commodities exchange management company

EGX to claim 30% ownership of commodities exchange; who will own the futures exchange still to be determined: The EGX is staking its claim to the as of yet unestablished commodities exchange, according to statements by EGX Chairman Mohamed Farid picked up by Al Mal. The EGX will hold a 30% stake in the exchange. The EGX’s stake is part of the government’s 50% ownership share in the new exchange, with other shareholders set to include the General Authority For Supply Commodities (GASC), the Internal Trade Development Authority (ITDA), and the Egyptian Holding Company for Silos and Storage, according to previous statements by Supply Minister Ali El Moselhy.

49% of the EGP 100 mn exchange will be held by (mostly state-owned) commercial and investment banks, as well as a host of other state and quasi-state entities, such as Misr for Central Clearing, Depository and Registry (MCDR), the state Insurance Holding Company, the Federation of Egyptian Chambers of Commerce. State-owned banks expected to hold those shares include Banque Misr, the National Bank of Egypt, and the Agricultural Bank of Egypt. EFG Hermes and CIB are the two standouts from the private sector said to be likely to take a stake.

But Enterprise, wasn’t the commodities exchange already established in March? No it wasn’t. The domestic press appears to have jumped the gun on this back in March. The latest statements by Farid indicate that the ownership stakes have yet to be determined, as is the establishment of the exchange’s electronic trading platform. A final decision on which commodities will be traded still hasn’t been made, although ITDA head Ibrahim Ashmawy assures Al Mal that this “is happening soon.”

We’re waiting to hear back from the EGX on whether trading in the exchange will start in September as earlier announced.

Background: The Egyptian Commodity Exchange was given the greenlight by the Cabinet in January. The exchange was expected to initially trade in six commodities — wheat, rice, corn, potatoes, onions, and oranges. It is unclear whether these commodities will underpin the as of yet established commodities future exchange.

And speaking of the futures exchange, a meeting yesterday to set the regulations governing it has yet to determine whether the private sector will be allowed to own shares. One thing that was made clear is that 75% of shares in the exchange — which will launch derivatives trading in Egypt — must be held by one or more financial institutions, whether they be state-owned or private, according to statements by FRA chief Mohamed Omran (pdf) at the meeting. The meeting was attended by MCDR, the EGX, as well as private-sector commercial and investment banks, insurance companies and representatives from the EBRD and the International Finance Corporation. Omran closed out the meeting by forming a working group to draft the regs and guidelines for the exchange. It is still unclear when this will be launched.

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