Egypt’s Financial Regulatory Authority has approved updated rules for the Settlement Guarantee Fund to enhance capital market stability and align with global standards. Key changes include a significant resource increase to strengthen risk management and empower members to settle obligations efficiently, while a structured Management Committee oversees operations.
The Financial Regulatory Authority (FRA) of Egypt has approved new executive regulations for the Settlement Guarantee Fund, aiming to enhance capital market stability and adhere to global standards. These rules are based on a resolution from the FRA and developed by the Misr for Central Clearing, Depository and Registry (MCDR) Board in coordination with the Fund’s Management Committee.
The FRA seeks to improve MCDR’s operations to align with international practices of central securities clearing and settlement entities, specifically targeting counterparty risks. The new framework includes a significant increase in the Fund’s resources, elevating them to 650% of member subscriptions through a structured risk management approach known as the “Waterfall” strategy.
This “Waterfall” method ensures a prioritized allocation of financial resources to manage potential technical and financial challenges, drawing from multiple sources: the Central Securities Depository, the Investor Protection Fund, and additional member contributions if necessary. This approach strengthens the Fund’s capacity to mitigate risks effectively.
Furthermore, the FRA has granted Fund members the authority to settle their obligations related to securities listed on the Egyptian Stock Exchange up to six times their subscription value, applicable for transactions with a settlement period shorter than the T+2 standard. This enhances the Fund’s role in counterparty risk reduction during trading activities.
The governance of the Fund includes a Management Committee of seven members, chaired by the MCDR Managing Director and comprising representatives from various sectors, including brokerage firms, custodians, and the Egyptian Exchange. The FRA’s approval is required for these appointments, ensuring diversified representation and effective oversight.
These initiatives reflect the FRA’s broader commitment to stabilize non-banking financial markets and protect stakeholders’ interests, ultimately fostering a more robust financial environment in Egypt.
The FRA’s new regulations for the Settlement Guarantee Fund aim to enhance financial stability by aligning operations with international best practices. Key changes include increased resource allocation and expanded settlement capabilities for members, ensuring effective counterparty risk management. The establishment of a governed Management Committee further underscores the FRA’s commitment to robust oversight and stakeholder protection in Egypt’s financial markets.
Original Source: www.zawya.com
