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Thursday, 22 October 2020

We’re getting closer to a final decision on the ownership structure of Egypt’s new futures exchange

REGULATION WATCH- We’re getting closer to a final decision on the ownership structure of the new futures exchange — and private sector involvement is still part of the plan, according to a report in Al Mal’s print edition that cites sources it says are in the know. The working group mandated with completing the regulations and guidelines governing the futures exchange has drawn up a preliminary ownership structure for the exchange that will see the EGX take a non-controlling stake, alongside domestic and foreign financial institutions and foreign exchange operators with experience in futures contracts. The door will also be open for state-owned and private Egyptian banks and Misr for Clearing, Depository, and Registry to get a slice of the exchange’s ownership, according to the sources. The report makes no mention of the Central Bank of Egypt (CBE) being among the shareholders in the exchange, although earlier reports had indicated the CBE was interested in a piece.

The distribution of the shares between the owners is still up in the air and could become clearer next week following a meeting of the Financial Regulatory Authority’s (FRA) advisory committee, the sources say. Once the details are ironed out, the committee will present the proposal to the authority’s executive board.

Background: The creation of a futures market was made possible thanks to amendments to the executive regulations of the Capital Markets Act, which were issued in July 2018, opened the door to the introduction of new financial instruments, including short-selling, futures and commodities exchanges, sukuk, and green bonds. We’ve already been getting encouraging signals from FRA boss Mohamed Omran and deputy chairman Khaled El Nashar that the regulator wants the private sector to be involved from the get-go and circumvent the need to privatize the exchange later on.

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