EGYPT Law and Practice Contributed by: Ibrahim Shehata, Hesham Kamel, Mohamed Abed and Hamza Shehata, Shehata & Partners Law Firm
the general provisions of the individual trading or brokerage account agreements. 6.8 Market Integrity Principles Market integrity is built on two key elements: adequate disclosure and a fraud-free market. To uphold market integrity, adequate disclosure is required by the Capital Market Law and its exec - utive regulations from brokerage companies to disclose conflicts of interest and maintain strict client confidentiality. Under Article 244 of Decree No 39 of 1998, brokers, directors and employees are prohib - ited from engaging in insider trading, a form of securities fraud where non-public, material information about a company is misused for per - sonal gain. Transactions must be justified, and excessive trading (churning) to generate fees is banned. Brokers may only execute trades based on recorded client instructions, and clients must be informed of completed transactions within 24 hours. In addition, any trades involving company direc - tors, employees or their relatives require written approval from the board of directors. These regulations ensure transparency, fairness and investor protection in the market. 7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations The EGX establishes trading rules and proce - dures for all participants, including high-frequen - cy and algorithmic trading. The EGX has created an electronic trading plat - form for the Primary Dealers System, which
facilitates bond trading based on “clean prices” , where accrued interest is factored in automati - cally. It also calculates key metrics like yield to maturity, current yield, duration and accrued interest. The system connects electronically with primary dealers, custodians and Misr for Cen - tral Clearing, Depository and Registry Company (MCDR). Launched to boost bond market liquidity, the Pri - mary Dealers System aims to lower government borrowing costs and equip the CBE with tools for secondary market intervention via open mar - ket operations. Its primary functions are under - writing initial government securities offerings and acting as market makers in the secondary market. 7.2 Requirement to Be Licensed or Otherwise Register as Market Makers When Functioning in a Principal Capacity Becoming a market maker in Egypt requires a licence from the FRA and registration in its des - ignated register, as stipulated by the Capital Market Law. To qualify, a company must meet specific criteria set by the FRA, including: • minimum issued and paid-up capital of EGP10 million; • more than 50% ownership by FRA-licensed companies operating in the securities sector; and • dedicated capital for market-making activi - ties: (a) EGP10 million for each traded index fund; and (b) 20% of the average daily trading val - ue of the specific security (minimum EGP250,000 for EGX-listed, EGP100,000 for SMEs), adjusted quarterly by the stock exchange.
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