الهيئة العامة للرقابة المالية

• The amendments aim to align with global best practices and improve the capital market’s financial stability.
• Implementation of the ‘Waterfall’ concept allows an increase in the Fund’s resources by up to 650% of members’ subscription values.
• Restructuring the Fund to align with global CCPs operational mechanisms will reduce Counterparty Risk.
• Members of the Fund are permitted to request settlement amounts reaching six times their subscription to increase trading volumes. The Authority may increase this maximum limit.
• To improve fund governance, the Authority is forming a 7-member management committee with representation from MCDR, Fund members, Egyptian Exchange and Investor Protection Fund.

FRA has approved the operational rules and procedures governing the Settlement Guarantee Fund, as issued by the Board of Directors of Misr for Central Clearing, Depository and Registry (MCDR) in coordination with the Fund’s Management Committee. This approval, pursuant to FRA Board Resolution No. 68 of 2024, aims to refine the Fund’s operational mechanisms and mitigate counterparty risk in settlement processes.

The initiative aligns MCDR’s operations with global Central Counterparties (CCPs) standards, significantly reducing counterparty risk. A key enhancement is the expansion of the Fund’s resources to up to 650% of members’ subscription values through the implementation of a “Waterfall” mechanism for counterparty risk management. This ensures a structured and sequential utilization of financial resources to address potential defaults.

The “Waterfall” concept incorporates funding from multiple sources, including MCDR, Investor Protection Fund and additional member contributions upon request. This approach strengthens the Fund’s capacity to hedge against potential risks, adhering to international best practices in all Central Counterparties (CCPs) in the securities markets.

FRA has authorized Fund members to request settlement of obligations arising from transactions in Egyptian Stock Exchange-listed securities, up to six times their subscription amount, for transactions with a settlement period shorter than the standard T+2.

The Settlement Guarantee Fund plays a crucial role in fulfilling obligations from securities trading and related financial settlements, effectively mitigating counterparty risk. Membership includes all settlement members whose settlements are processed directly through their accounts with Misr for Central Clearing, Depository and Registry (MCDR) and clearing banks, whether for their own accounts or on behalf of clients.

To ensure robust governance, FRA has mandated a seven-member management committee. Chaired by the Managing Director of MCDR, the committee will include two representatives from securities brokerage firms, one from custodians performing settlements, one from MCDR (selected by its board upon the Managing Director’s nomination), one from the Egyptian Exchange (nominated by its Chairman) and one from the Investor Protection Fund (nominated by its Chairman).

Representatives from Misr for Central Clearing, Depository and Registry (MCDR), Egyptian Exchange and Investor Protection Fund are appointed following the Authority’s issuance of a “no objection” notice. The committee’s membership term is three years, commencing from FRA’s approval date of the company’s board resolution establishing the committee. The committee is authorized to invite individuals deemed relevant to attend its meetings, though without granting them voting rights.

This initiative is part of FRA’s ongoing efforts to ensure the stability of non-bank financial markets and safeguard the rights of all stakeholders