FRA makes legal amendments to establish ‘futures exchange’
Chairperson of the Financial Regulatory Authority (FRA) Mohamed Farid has revealed that the authority is in the process of making legal amendments to allow companies to establish subsidiary clearing companies to settle future contracts with no maximum stake in the capital.
The FRA approved several months ago the ownership structure of the “Futures Exchange” and its “clearing” companies, and that each company will be allowed to hold a maximum 10% stake in its clearing company.
According to the amendments to the Capital Market Law, futures contracts whose value is derived from financial or in-kind assets, price indices, commodities, or others determined by the Authority will be traded on that stock exchange.
Farid said that an amendment will be made to allow the entity that has experience in organizing trading and full knowledge of all aspects of the process to be the main shareholder in the company to be established for futures trading and settlement, stressing that the amendments will be more appropriate to the current market situation.
He added, in an interview with Daily News Egypt, that the amendments expected to be issued will allow those who wish to establish a futures clearing company to pay EGP 25m initially of the capital, which is scheduled to be in the range of EGP 100m, to obtain the license, provided that the rest of the capital is paid before starting operation and practicing activity.
Farid further added that these companies will work in a sector that requires a certain amount of technical and technical knowledge, so the necessary technical requirements must be met, and he has sufficient experience in that industry, in addition to the necessary technological systems, which are expensive.
Farid mentioned that those who have experience in this industry are usually the stock exchanges, clearing companies, and depository companies, especially since they have sufficient experience in settlement in the stock markets, bearing in mind that the settlement of futures contracts is different from stocks due to the nature of the risk, explaining that they can have the desire to establish futures clearing companies.