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FRA submits a draft amendment to the provisions of the Central Depository and Registry Law - Sunday 23/6/ 2019

• Dr. Omran: Allowing the Central Bank of Egypt (CBE) to establish a joint stock company wholly owned by it or with others, to carry out clearing and settlement of government bonds and treasury bills
• Dr. Omran: Proposed amendments to the Central Depository and Registry Law represent an important step to activate Futures Exchange
• Dr. Omran: We have introduced a unified legislation regulating the provisions of the clearing and settlement of both the present market including the securities and government securities and the future market represented in futures contracts

As FRA seeks the development of the legislative structure of non-banking financial activities in order to absorb the changes that occur in the capital market and to strengthen the competitiveness of the national economy and investors’ protection,
Dr. Mohammed Omran – FRA’s Chairman revealed that FRA’s BOD approved at its last meeting last week a proposal to amend some provisions of the Central Depository and Registry Law to become a comprehensive law regulating clearing and settlement transactions  both in the present and future markets. That is besides some provisions governing clearing and settlement of derivatives, commodities, other financial instruments or indicators. The new law will include clearing and settlement of all securities, namely government securities, whether treasury bills or government bonds.

In order to activate Futures Exchanges and to update its system of work, the proposed amendment allows companies to be licensed by the Authority to carry out clearing and settlement of futures contracts, whether this license is granted to central depository and registry companies or through a new company established for this purpose.

FRA’s Chairman said that one of the most important issues dealt with in the amendment was to allow the Central Bank of Egypt to establish a joint stock company wholly owned by it or with others to carry out clearing and settlement of government bonds and treasury bills. He pointed out that FRA’s BOD should issue the necessary conditions, controls and procedures for granting the license and practicing the activity.

He added that in light of the Central Depository and Registry Law, the central depository activity deals with depository and registration of securities, clearing and settlement of financial centers arising from trading and transfer of ownership of securities including registering the right of pledge. He noted that it was important that the proposed amendments include provisions regulating securities pledge between the pledgor debtor and pledgee creditor.

FRA’s Chairman affirmed that the proposal established a unified law regulating clearing and settlement, whether for the present market represented in securities and government securities or for future market represented in futures contracts. In this respect, investors will refer to one legislation that includes all the provisions governing Central Depository and Registry and the rules to be followed upon clearing and settlement of securities and contracts subject to its provisions.

The proposed amendments include the following:

1- Granting license to companies authorized by the Authority to carry out clearing and settlement of contracts traded on the Futures Exchanges, whether it is a license for the depository companies or through a new company established for this purpose. The Authority shall manage the conditions, controls and procedures necessary for granting the license and practicing the activity.

2- Allowing the Central Bank of Egypt (CBE) to establish a joint stock company wholly owned by it or with others, to carry out clearing and settlement operations for government bonds and treasury bills

3. Regulating securities pledge between the pledgor debtor and pledgee creditor.

4. Allowing MCDR, in the event of bankruptcy by one of its members, to finalize and settle the final orders ordered by such member and to settle the financial centers. Besides, allowing the Authority to cancel such transactions and orders if accompanied by fraud. In this respect, the bankrupt member is obliged to pay a compensation to activate FRA’s role in regulating the market and protecting investors of goodwill.

It is worth mentioning that the Central Depository and Registry Law. (93) of 2000 was issued to regulate the central depository and registration activity in the present market. The said law discussed in details the provisions related to the central depository, registration, clearing and settlement of securities in order to settle the legal centres arising from dealing in securities. In addition, the said law specified the rights and obligations of those who deal in these securities. The law also regulated the provisions of establishing and managing the company licensed by FRA to carry out the activities of central depository and registration.

In 2018, pursuant the amendments to the Capital Market Law under Law no. (17) of 2018,   the Law stipulated the establishment of Futures Exchanges and other indicators determined by the Authority.  noting that Futures Exchange’s clearing and settlement transactions  shall be carried out in accordance with the provisions of the Central Depository and Registry Law through MCDR licensed by the Authority.