Key market participants in Egypt's stock Exchange
In Egypt the capital market has five major players who are governing the process of trading in the stock exchange market:
The Capital Market Authority ''CMA''
The Capital Market Authority (CMA) is the market regulator, whose primary mission is to protect investors and maintain the integrity of securities market in Egypt. The Capital Market Authority oversees key market participants such as brokerage firms, mutual funds, investment banks, rating companies etc. in addition to the Cairo and Alexandria stock exchange.
The Egyptian Exchange ''EGX''
Cairo & Alexandria Stock Exchanges (CASE) is the only registered Securities Exchange in Egypt. CASE is the trading venue whereby member firms or brokers could buy/sell securities electronically, on behalf of their customers or investors. CASE is currently a public juristic person and there are no shares issued or owned by other entities as it is owned by the government. Though, CASE is owned by the government, it is managed like a private company.
Misr Clearing, Settlement, Depository & Registry Company ''MCDR''
MCSD is a private company, which handles the clearing and settlement operations as well as acting as the Central Depository for all securities in Egypt. The main shareholders of MCDR are CASE, banks and member firms. Since MCDR was established in October 1996, the securities market in Egypt moved toward a completely dematerialized environment, in which physical stocks are no longer existent. Dematerialization has several advantages including: avoiding the inconvenience of carrying documents, eliminating the danger of losing securities either by thrift or any damage, eliminating the risks associated with securities being lost or faked, simplifying the trading process as securities become easily transferred through the book entries or accounts of member firms at the Depository, having in place a safe and electronic way for distributing dividends and other corporate actions of listed companies.
A brokerage firm is licensed by the Capital Market Authority to trade on CASE. In addition, CASE must approve membership after the brokerage firm passes an exam on the trading system of CASE. The brokerage firm acts as the link between the investor and CASE. The brokerage firm carries out investors’ transactions whether buy or sell in return for an agreed upon commission fee from investors. In other words, member firms act as agents so they buy and sell securities on behalf of investors since investors are not allowed to trade directly nor have access to CASE trading system. Brokers also provide advice to their customers based on their in-house research capabilities.
Investment banks are financial institutions that deal primarily with raising capital, corporate mergers and acquisitions, and securities trades.
A key role of investment banks is to help companies raise capital in the capital markets by arranging the issuance of new securities. There are two ways to do this: through a public offering or through a private placement.
A public offering involves selling securities to a wide range of investors. The investment bank can sell the company's stock in an initial public offering (IPO) or secondary offering, or they can arrange a bond issue.
Private placement is an offering of securities to a small group of investors. There are fewer rules to comply with, though the investment bank must show that the investors comply with certain criteria. The distribution of other types of investment, other than securities, is usually also done through a private placement. This could include investments in venture capital or private equity, acquisitions and other strategic investments by companies.