Regulatory Alerts2014-01-01
EFSA Board of Directors Decision No. 38 of 2014 Regarding Contracting with a Single Market Maker for Index Funds
The Egyptian Financial Supervisory Authority (EFSA) issued Decision No. 38 of 2014 to establish regulatory controls for index funds contracting with a single market maker. The decision mandates that funds obtain prior board approval by justifying the need for a single maker and outlining future plans, while strictly limiting issued documents to 20% of net equity and requiring enhanced liquidity commitments of 150% during trading sessions. These regulations aim to ensure market stability and adequate liquidity provision in the absence of multiple market makers for specific index funds.
EFSA Board of Directors Decision No. (38) of 2014
Dated 12/3/2014
Regarding Controls for Contracting with a Single Market Maker for Index Funds
The Board of Directors of the Egyptian Financial Supervisory Authority (EFSA)
Having reviewed the Capital Market Law issued by Law No. (95) of 1992 and its executive regulations, as well as the decisions issued in implementation thereof;
And having reviewed the Central Depository and Registration of Securities Law issued by Law No. (93) of 2000 and its executive regulations;
And having reviewed Law No. (10) of 2009 regarding the regulation of supervision over markets and non-banking financial instruments;
And having reviewed Presidential Decree No. (191) of 2009 regarding the rules organizing the Egyptian Exchange and its financial affairs;
And having reviewed Presidential Decree No. (192) of 2009 issuing the Basic Statute of the Egyptian Financial Supervisory Authority;
And having reviewed the approval of the Board of Directors of the Authority in its session held on 12/3/2014;
Decided
(Article One)
Index funds wishing to contract with a single market maker are obliged to submit a request to obtain the approval of the Board of Directors of the Authority, accompanied by the following:
- Reasons and justifications for requiring the contract with a single market maker.
- The fund's future plan regarding contracting with other market makers.
The approval of the Board of Directors of the Authority for the fund to contract with a single market maker will be based on the extent of the availability of companies licensed by the Authority to conduct this activity, the equity rights of those companies, and the number of existing contracts they have with other index funds.
(Article Two)
Subject to the obligations imposed on index funds according to the provisions of the Capital Market Law, its executive regulations, and the decisions issued in implementation thereof, index funds that have obtained the approval of the Board of Directors of the Authority to contract with a single market maker are obliged to comply with the following:
- Not exceeding the value of documents that the fund is permitted to issue by 20% of the total net equity, and loans supporting the fund's market maker, without prejudice to the maximum limit between issued documents and the capital of the fund's company.
- That the fund's contract with the market maker includes a commitment by the market maker in this case not to reduce the total volume of both sell offers and buy requests they commit to in each trading session below 150% of the commitments specific to the market maker in the usual cases outlined in the trading rules for market makers regarding documents of index funds traded by the Exchange.
(Article Three)
This decision shall be published in the Egyptian Gazette and on the websites of the Authority and the Egyptian Exchange, and shall be enforced as of the day following the date of its publication in the Egyptian Gazette.
Chairman of the Board of Directors
Sherif Samy
46076
The Egyptian Financial Supervisory Authority (EFSA)
Address: Headquarters, Smart Village, Building 15 - A B, Km 68 Cairo/Alexandria Desert Road, Giza Governorate, Postal Code: 11757
Telephone: 22570040 - 22570041, Fax: 22570040
Email: info@efsa.gov.eg
Website: www.efsa.gov.eg