Egypt’s FRA has approved new rules for the Settlement Guarantee Fund to enhance capital market stability and align with global standards. Key changes include increased resource allocations for risk management and provisions for quicker transaction settlements. A structured governance model oversees the Fund’s operations, highlighting the FRA’s commitment to financial stability.
The Financial Regulatory Authority (FRA) of Egypt has authorized new executive rules for the Settlement Guarantee Fund, aimed at enhancing global compliance and strengthening the capital market’s financial stability. The regulations were developed by the Board of Directors of Misr for Central Clearing, Depository and Registry (MCDR) in collaboration with the Fund’s Management Committee, pursuant to FRA Board Resolution No. 68 of 2024, which seeks to regulate operations and reduce counterparty risks.
The FRA’s enhancement plans include increasing the Fund’s resources by 650% relative to member subscriptions, employing a “Waterfall” approach to manage counterparty risk. This involves utilizing a structured sequence of financial resources from various sources, including the Central Securities Depository and Investor Protection Fund from Non-Commercial Risks, as well as contributions from Fund members when necessary. This initiative aligns with international standards followed by central clearing entities.
Furthermore, the FRA has permitted Fund members to negotiate settlements for rights and obligations from transactions involving securities on the Egyptian Stock Exchange, allowing amounts up to six times their subscription. This provision specifically applies to transactions with settlement phases that are shorter than the conventional T+2 cycle, thereby facilitating quicker financial exchanges while reducing counterparty risk.
The Settlement Guarantee Fund plays a critical role in ensuring the fulfillment of obligations related to securities trading on the Egyptian Stock Exchange, thereby reducing financial and operational risks stemming from these transactions. Membership includes all settlement participants making direct settlements through MCDR and clearing banks, either on their own behalf or on behalf of clients.
To oversee the Fund’s activities, governance structures have been outlined, including a Management Committee composed of seven members. The committee is chaired by the Managing Director of MCDR and includes representatives from brokerage firms, custodians, MCDR, the Egyptian Exchange, and the Investor Protection Fund. Committee members are appointed for three-year terms following non-objection from the FRA, ensuring a structured management approach.
In summary, the FRA’s new regulations for the Settlement Guarantee Fund seek to enhance the financial stability of Egypt’s capital markets while aligning with global best practices. The initiatives focus on increasing resource allocations, reducing counterparty risks, and establishing effective governance structures within the Fund. These steps are expected to significantly improve operational efficiencies and stakeholder protection in Egyptian financial markets.
Original Source: www.zawya.com
