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December 07, 2019
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EGX allows the addition of the investment cash funds as a grantee for the margin trading
Egyptian Exchange
Posted: Wednesday, 20 Nov 2019

EGX has issued a resolution allowing the addition of the subscribed investment cash funds as a grantee for the marginal trading this comes a step forward to activate the margin trading mechanism which consequently will raise the market liquidity and will enhance the trading environment. The decision stipulates that "member entities or companies of the Egyptian Exchange allowed to practice margin trading, as well as receiving subscriptions to the cash investment funds subscribed to by them, shall take these documents as collateral for the client's margin trading through the same entity or company." The recipient of the subscription shall be subject to the same conditions as list (A) of the specialized activities lists, which allows these documents to be counted as a 100% guarantee. In addition, the market value of the document is evaluated daily by the management company, so the document recovery can be performed to liquidate the collateral and collect cash within one business day. This comes after the approval of the Egyptian Financial Regulatory Authority, complementing EGX’s efforts to further activate the margin trading mechanism as one of the mechanisms that contributes to increasing liquidity rates and activating trading in the market. EGX held series of meetings with members of the Egyptian Banks Union, especially banks that act as custodians to discuss mechanisms to activate the role of banks in the purchase of securities through margin trading. In accordance with regulatory procedures, brokerage firms or custodians are required to reassess the securities purchased by margin at the end of each business day in accordance with their market value, if the client's indebtedness exceeds 60% of its market value as a result of low prices, he shall notify the customer of the reduction of this percentage either by paying cash or offering cash guarantees. Brokerage firms or custodians shall have the right to take measures to sell securities and liquidate collateral provided by the client to reduce his indebtedness, in case the client does not reduce the indebtedness.
 
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