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Sunday, 4 April 2021

Brokerages call for restrictions on margin trading

Market players proposed introducing restrictions on margin trading during a meeting with the Financial Regulatory Authority (FRA) last week, the regulator said in a statement (pdf) yesterday. Representatives from a handful of brokerages and custodians called for regulators to put a maximum limit on the volume of margin trades allowed for each security as well as the market as a whole, said Islam Azzam, deputy chairman of the FRA. They also requested that main shareholders face a cap on margin trading of their companies’ stocks. The volume of margin transactions on the EGX is currently around EGP 5 bn, Azzam said.

This comes a week after the FRA green-lit a new EGP 1 bn+ fund that will be deployed to support margin lending in a bid to boost trading volumes on the bourse. The central bank-administered fund will channel liquidity to brokerages by providing financing at competitive rates. The regulator also last month permitted non-bank lenders to finance margin lending.

What’s next? The Egyptian Exchange and Misr for Central Clearing, Depository and Registry should meet this week with the FRA's Advisory Committee to discuss the proposals, Azzam noted. Final proposals will then be submitted to the FRA's board this month.

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