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FRA’s Chairman issues regulatory decision no. 33 of 2019 on licensing conditions and procedures set for operating in Futures Exchanges

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Dr. Omran: The Authority facilitated the establishment of a new futures company and allowed the Egyptian Stock Exchange to trade in derivative according to certain technical and regulatory determinants

Within the framework of implementing  the roadmap set by the Authority to activate Futures Exchanges and trading in derivatives  either through licensing the establishment of a new entity ” Futures Exchanges” or granting  license to the Egyptian Stock Exchange to engage in the activity without the need to establish a company,
 Dr. Mohammed Omran –  FRA’s Chairman emphasized that FRA’s BOD  approved in its last session a decision allowing the Authority to grant license to joint-stock companies to engage in futures contracts after ensuring that it meets all the procedures and conditions prescribed by law to establish companies operating in the field of securities and after obtaining FRA’s BOD approval.

FRA’s Chairman stated that FRA’s BOD decision no. (33) of 2019 obliged  companies  wishing to obtain a license to trade in derivatives  to fulfill a number of requirements. The most important of these requirements are: issued and paid up capital shall  not be less than twenty million Egyptian pounds or its equivalent foreign currency. Also, contributions of financial institutions or exchanges or companies licensed to operate in capital markets shall not be less than 75% of the structure of the shareholders of Futures Companies. In addition , company’s BOD shall be formed for a period of three years subject to renewal, taking into account the conditions stated in FRA’s BOD decision no. 107 of 2016 on governance rules for securities companies.

Dr. Omran added that the license granted to companies wishing to trade in derivatives shall be issued in accordance with FRA’s BOD decision and after ascertaining the availability of technical requirements to carry out the activity at the headquarters of the company and its branches. Besides, ensuring the existence of an electronic trading system and a manual for working procedures that achieves transparency and provides adequate information to the client to maintain the safety and stability of transactions in the market. Also, checking the availability of electronic link lines with each of the Authority, the MCDR, brokerage companies and other relevant entities. Besides, the availability of electronic software required to initiate the activity, in particular the electronic control of transactions and ensuring the payment of the defined insurance fees.

 On the other hand, Futures Exchanges shall also undertake all necessary measures and procedures to prevent, monitor and deal with any violation of the rules and regulations governing the market and shall correct and deal with the consequences thereof.

Dr. Omran said that FRA’s BOD allowed the Egyptian Stock Exchange to trade in derivative without the need to establish a joint-stock company. In this respect, the Egyptian Stock Exchange will obtain a license after gaining the approval of FRA’s BOD and after meeting all licensing conditions. The Stock Exchange shall make all administrative and technical amendments necessary to separate – functionally, financially and technically – its activities in the field of the current securities markets from trading in derivatives.

FRA’s Chairman noted that the Egyptian Stock Exchange shall form a committee to supervise trading in derivatives. The committee shall include at least seven members or maximum eleven members, provided that they shall meet the same conditions required by Futures Exchange’s BOD. Their names, qualifications and experience shall be disclosed as soon as they are appointed.  Also, a full-time Executive Manager shall be appointed to manage trading in derivatives.
 

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Regulator Information

Abbreviation: FRA
Jurisdiction: Egypt

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