Market Profiles

FII Market Entry Requirements for Egypt

RBC IS operates a segregated account structure in this market.

Please refer to 'Market Account Opening Requirements' for information on the market requirements. Clients are requested to refer to the requirements for information purposes only.

For further information or support around accessing this market, please contact your RBC IS representative.

The Egyptian Exchange (EGX) 

Egypt has one stock exchange with two locations, one based in Alexandria, and the main exchange in Cairo. The two exchanges locations are linked electronically and operate as a single market. Both are governed by the same chairman and board of directors and were referred to as the Cairo and Alexandria Stock Exchanges (CASE).

The Alexandria Stock Exchange was officially established in 1888, followed by the Cairo Exchange in 1903. The two exchanges were very active in the 1940s and the Egyptian stock exchanges ranked fifth in the world. The market shrank dramatically after 1959, following a spate of restrictions and nationalisations.

CASE is now formally known as The Egyptian Exchange (EGX) with effect from 21 July 2008

Nile Stock Exchange (NILEX)

Launched in November 2007, the NILEX is a stock exchange dedicated to small to medium sized enterprises (SMEs) and currently has 32 listed companies with a trade settlement at T+2 basis. 

NILEX is characterized its simplified procedures and conditions to facilitate the listing process; among these conditions:

• The shares should be Central Registered and Deposited.
• The company Decree and terms of issue should not contain any restrictions on the trading of its listed shares.
• The company should introduce financial statements for the two fiscal years prior to the listing request,. In case of the issuing only one financial statements for a full fiscal year, it shall be submit a 3 years future business plan that includes the expected results approved by the nominated advisor or a financial consultant accredited FRA. This should include an approval from FRA on the financial consultant study of the fair value of the share in terms of following the rules and methodologies in preparing the study.
• The shareholders' equity for the last annual financial statements or periodical one prior to the listing request date should not be less than paid-in capital.
• The capital should be fully paid.
• The listed shares should not be less than 20% of the total company shares and the number of shareholders should not be less than 100 shareholders during a period of more than six months from the listing date.
• The percentage of retention of the founders and Board members should not be less than 51% of its capital for a period of not less than two fiscal years from the listing date

Market Fees

• Stock Exchange service fees for listed securities is 0.00010 per transaction, with a maximum of EGP 5,000.
• Clearing and Depository fees is 0.00010 per transaction, with a maximum of EGP 5,000.
• Investor Protection Fund (IPF) fees is 0.00005 per transaction, with a maximum of EGP 5,000.
• FRA fees is 0.00005 per transaction, with a maximum of EGP 250.
• A 50% reduction of the Stock Exchange service fees for listed securities, Clearing and Depository, IPF, and FRA fees to apply for trading in bonds and debt instruments.
• Stock Exchange service fees for unlisted securities is 0.001 per transaction, with a maximum of EGP 50,000.
• Government Bonds additional fees remain the same as EGP 50 per transaction.
• All fees for transactions executed in USD are paid in the same currency.
• Government bonds
  • Stock Exchange service fees of 0.00005 per transaction, with a maximum of EGP 5,000.
  • FRA fees of 0.000025 per transaction, with minimum of EGP 1 and maximum of EGP 250.
  • MCDR government bonds fees remain the same as EGP 50 per transaction.

The trading system at EGX has perceived gradual development from an outcry system (prior to 1992) to an automated order-driven system. As a result of the growth in business, the exchange got hold of a proven and scalable system conforming to international standards and up-to-date technology.

In its endeavour to keep abreast with the latest technological advancements, based on its vision to become the financial hub and investment gateway in the Middle East and North African (MENA) Region that best serves its stakeholders, EGX has upgraded its trading platform to OMX high performance 'X-Stream' solution, and launched it on 27 November 2008, replacing the old trading system 'EFA Horizon'.

X-stream is designed to support the increasing volume of trading on EGX as well as the simultaneous trading multiple product classes including equities, debt, commodities, ETFs, futures and options in both an exchange traded and cash/OTC/derivatives environment. X-stream has the capacity to meet the future needs of EGX.

Moreover, EGX offers an in-house developed OPR program that deals with the IPO's and private placements before execution in the market. This program facilitates orders' registrations and cancellations, assures accurate calculations of the allocation percentages and enables the market to absorb efficiently the surge in the amount of placements.

Discovery Session*:-   9.30am ---9.50am - 10:00am (Random close)

Official Trading Session:- 10 am----2.30 pm

Bonds Market (Primary Dealers):- 10 am---2.30 pm

NILEX (SMEs Market):- 10:00 am ------2.30 pm

Block Trades:- 9.15 am-----9.45 am

Omnibus Accounts:- 2.30 pm-----3.30 pm

Over the counter market:Over-the-CounterMarket

Deals Market--9.30 am---2 pm

OTC Market (dematerialised securities):- 9.30 am---11 am

Orders Market**12 pm--12.30 pm

Effective 7/8/2014 trading session
** Trading takes place on Monday & Wednesday only

ISIN (International Securities Identification Numbering): Yes

Other: Most securities are identified by company name as there is no standard numbering system.

Ministry of Investment: oversees the Financial Regulatory Authority (FRA). It supports the government's mandate to implement reform programmes aimed at improving investments in different sectors, adopting the role of coordinator of institutions and ministries. The ministry implements the asset management programme.

The Financial Regulatory Authority (FRA):

FRA reports directly to the prime minister with dotted line to the minister of investment.

The Authority is responsible for supervising and regulating non-banking financial markets and instruments, including the Capital Market, Insurance Services, Mortgage Finance, Financial Leasing, Factoring and Securitization. FRA's role is to regulate the market and ensure its stability and competitiveness to attract more local and foreign investments. " The mandate of the Authority also includes limiting inconsistency risks and addressing problems arising from applying different supervisory rules".

The Egyptian Financial Supervisory Authority is replacing the Egyptian Insurance Supervisory Authority, the Capital Market Authority, and the Mortgage Finance Authority in application of the provisions of the supervision and regulation of Insurance law no. 10 of 1981, the Capital Market law no. 95 of 1992, the Depository and Central registry law no. 93 of 2000, the Mortgage Finance law no. 148 of 2001, as well as other related laws and decrees that are part of the mandates of the above authorities.

FRA is also the admin authority for companies established under the provisions of law of financial leasing issued by law no.95 for year 1995r 2009.

Central Bank of Egypt: 

The Central Bank of Egypt (CBE) is an autonomous regulatory body, assuming the authorities and powers vested therein by Law No. 88 for 2003, and the Presidential Decree No. 65 for 2004.

The main objectives and functions of the CBE are as follows:-

- Realizing price stability and ensuring the soundness of the banking system

- Formulating and implementing the monetary, credit & banking policies

- Issuing banknotes and determining their denominations and specifications

- Supervising the banking sector

- Managing the foreign currency international reserves of the country.

- Regulating the functioning of the foreign exchange market.

- Supervising the national payments' system.

- Recording and following up on Egypt's external debt (public and private)

Authorities and powers vested therein by Law No. 88 for 2003, and the Presidential Decree No. 65 for 2004.

Over 99.6% of the equities market is dematerialised

There are no set board lots. However, all Treasury-bill (T-bill) trades must have a nominal value of EGP 25,000 or its multiples.

Circuit breakers - price limit for temporary suspension is 10% with suspension time of 10 minutes. Price limit for suspension for the rest of the trading day is 20%. EGX can also adjust the temporary suspension time from 10-30 minutes at its own discretion, according to market conditions. EGX will still be able to resort to suspension in the case of sudden or unexpected changes in stock prices.

T-Bills can settle starting T+0 up to T+5 based on traders/ dealers agreement as they settle OTC and the cycle of T-Bills is negotiable in the market.

T-Bill instructions should be received by latest settlement date at 11:00 Cairo Time to avoid failure of the trade.

The delivery-versus-payment (DVP) model was implemented in the market on March 1, 2016. Any trades executed from that date in the market will have a settlement cycle of T+2 for both purchase and sale transactions. This new model only impacts equities and corporate bonds.

EGP, USD & EUR

There is no independent OTC market for equities. OTC trading must be executed through licensed brokers or through the EGX trading terminals. 

Purchase transactions:

T+0:

• Client places the order with the local broker for booking in the market.
• The local broker executes the transaction in the market and confirms it to the client
• The local broker selects the local custodian through which settlement will take place on the MCDR system.
• The local broker sends a copy of the trade execution invoice to the local custodian.
• Based on the confirmation received from local broker re trade execution, the client should start sending the relevant settlement instruction to the local custodian 

T+1:

• The local broker sends the original execution invoice to the local custodian.
• Local custodian should match the invoices against the settlement instructions received from clients, and check sufficient funding is available in the client's account.
• Local custodian to accept the obligation for all matched trades on the MCDR screen, where instructions are in place, valid, and with the appropriate funding by 2 pm Cairo Time.
• For instructions that fall under the following scenarios, the local custodian will not accept the obligation, which means the obligation for such transactions will automatically go to the local broker, and they will arrange to fund the trade instead:
  1. Missing/wrong instructions
  2. No funds
  3. Wrong execution
  4. Not our client
• At 5 pm Cairo Time, the MCDR will withdraw the file to work on it and will check the local custodian and local broker accounts to ensure sufficient funds are available based on the local custodian’s confirmation that all FX/funding instructions are in place.

T+2:

• At 8.30 am Cairo Time, MCDR will debit the funds from the local custodian's/local broker's account and credit the shares to clients simultaneously
• Local custodian to calculate the total local broker commissions based on the invoices on the settled transactions and credit / transfer them to the local broker accounts

Sale transactions:

T+0:

• Client places the order with the local broker for booking in the market.
• The local broker blocks the shares on the client’s account in preparation for executing the sell order.
• The local broker executes the transaction in the market and confirms it to the client.
• The local broker selects the local custodian through which settlement will take place on the MCDR system.
• The local broker sends a copy of the trade execution invoice to the local custodian
• Based on the confirmation received from local broker re trade execution, the client should start sending the relevant settlement instruction to the local custodian 

T+1:

• The local broker sends the original execution invoice to the local custodian
• Local custodian should match the invoices against the settlement instructions received from clients
• Local custodian to accept the obligation for all matched trades on the MCDR screen, where instructions are in place and valid, by 5 pm Cairo Time
• For instructions that fall under the following scenarios, the local custodian will not accept the obligation, which means the obligation for such transactions will automatically go to the local broker:
  1. Missing/wrong instructions
  2. Wrong execution
  3. Not our client

• The local broker should check the rejected trades and prepare the necessary supporting documentation to prove they are valid, and present the information to the Settlement Guarantee Fund (SGF).
• At 5 pm Cairo Time, the MCDR will withdraw the file to work on it. 

T+2:

• At 8.30 am Cairo Time, MCDR will debit the shares from the client account and credit the funds to the local custodian's account simultaneously
• SGF will review the rejected trades by the local custodian, and will step in to lend the shares to the buyer and keep the proceeds.
• SGF will calculate the relevant penalty starting SD(T+2) until actual settlement of the sale trade
• Local custodian to calculate the total local broker commissions based on the invoices on the settled transactions and credit them to the local broker accounts

Claims/Penalties process:

The Settlement Guarantee Fund (SGF) penalty will be calculated at 0.5% of the trade amount for each day settlement is delayed, whether for purchase or sale transactions. It is worth highlighting that since Egypt is a beneficial owner's market, all penalties apply to the end client in case of delays, even if it is the international broker dealer’s mistake.

Purchase Transactions:

• For purchase transactions where the local custodian has not accepted the obligation, the shares will be pending on the MCDR system, available for acceptance by the local custodian once the instructions are in place. Where instructions/funding have been received after the settlement cycle, the local custodian will settle the transaction on their records, and credit the full amount to the local broker account (who has funded the trade initially). (Late confirmation penalties may be imposed by the local broker to the client.)
• In case where the local broker refuses to fund the transaction on behalf of the client on T+2 and presents the relevant supporting documentation to the Settlement Guarantee Fund (SGF) to prove the trade is valid, SGF will step in to lend the relevant trade amount to the seller and will start calculating a daily penalty on the buyer till settlement. The claim must be paid within 5 business days from the date it is charged.
• In case of non-settlement of the purchase transaction by T+4, a sell-out takes place by T+5.

Sale Transactions:

• For sale transactions where the local custodian has not accepted the obligation, and instructions have been received late after the settlement cycle, MCDR will credit the sale proceeds net of any penalties imposed by the SGF to the local custodian. Local custodian will calculate the total local broker commissions based on the invoices on the settled transactions and credit them to the local broker accounts.
• In case where the local broker has not provided the supporting documentation to prove trades executed are valid, all penalties will be imposed on the local broker. A buy-in will take place by the SGF on T+5, and the price difference will be charged to the local broker, along with the penalties.
• In case of non-settlement of the sale transaction by T+4, a buy-in takes place by T+5.

GDRs process is as follows:

ADR/GDR cancellation details are as follows:

- Client sends receive instructions (MT540), for converting GDR in to local shares.

- Currently the ADR/GDR conversion process takes from 2 to 3 working days (provided that matched instructions are received by the counterparty).

-A list of the GDRS with their ratios to the local shares can be obtained from the Stock Exchange web site as follows:
http://www.egx.com.eg/English/MarketGDRs.aspx

- Client is kindly requested to coordinate with BNY as being the global depositary bank for any other requirements / documentations as subcustodian is concerned only with the local requirements.

ADR/GDR issuance details are as follows:

- Client sends delivery instructions (MT542), for converting local shares into ADR/GDR. - Field 70E should include the client account details held with the foreign depository (i.e. Euro clear, Clear stream Bank...)

- Currently the ADR/GDR conversion process takes from 2 to 3 working days (provided that matched instructions are received by the counterparty).

- Upon the Stock Exchange request on a case by case basis, The client has to fulfil the disclosure requirements that none of the shareholders own 5% or more of the company's capital and none of them are listed on the prohibited list. 

- Executive Decision number 177 outlines that the EGX has added a rule in article number 1 of the EGX Chairman’s decision number 85 for the year 2013 governing the issuance of GDRs, which dictates that the percentage of GDRs issued as a percentage of the total issuer company capital shares should not exceed the percentage of freely traded shares to the company’s capital.

For any company where the percentage of issued GDRs exceeds the percentage of freely traded shares, the company will only be allowed to cancel GDRs until the percentage matches the ratio of freely traded shares.

This new rule comes into effect as of Wednesday, 10 August 2016. It does not replace the previous requirement where GDRs can only reach one third of the issuer company’s capital.

-A list of the GDRS with their ratios to the local shares can be obtained from the Stock Exchange web site as follows:
http://www.egx.com.eg/English/MarketGDRs.aspx

- Client is kindly requested to coordinate with BNY as being the global depositary bank for any other requirements / documentations as subcustodian is concerned only with the local requirements.

Market specific charges per conversion:

                                       0.00025 x Last closing price of the share x number of shares
Stock Exchange fees = --------------------------------------------------------------------------------
                                            Average buy & sell of USD in the market of the day

Total Stock Exchange Fees are being rounded up to the nearest USD figure.
+
The converting agent fees per conversion of both GDRs to local shares and local shares to GDRs (currently USD 60 per conversion).

MCDR activated short selling in the market from December 1, 2019. The relevant arrangements are as follows:

• Investors who wish to lend their securities should enter into a contractual agreement with their subcustodians. Investors who would require to borrow securities should enter into a contractual agreement with a licensed broker. The lender will not be able to get their securities back before 30 calendar days from the date the securities are sold to the borrower in the market.
• Percentage of securities available for lending at the local custodians in total should not exceed more than 25% of the issued capital of a listed company. The lender should not lend more than 5% of the issued capital while the borrower should not borrow more than 0.05% of the issued capital of the issuer company.
• The criteria for securities to be eligible for short selling are as follows:
  • Market capitalisation to be 0.005% of the total free float.
  • Eligible securities are to be traded on 95% of the total trading days in the market.
  • Trading by each local broker should account for 10% of the stock’s daily average trading.
  • Daily average trading volume is to be 0.3% of the total investors' trading.
  • The turnover rate to be 20% of total free floating shares, or 0.001% of the daily average trading value.
  • The number of issued shares will be 300 million or more.
• Licensed brokerage firms will manage the short selling process between the borrower and the lender, manage the needed guarantees, reinvest the sales proceeds, and hand over the return on investment in full after deducting any applicable fees and expenses.
• Investors willing to borrow through their local brokers must pay a cash security deposit not less than 50% of the value of their borrowed shares, or not less than 20% of the value of their government bonds available in the investor’s portfolio.
• Short selling transactions will be processed through a special window that has been designed and in place via the MCDR terminals and available for both brokerage and custodian firms. The settlement cycle of the short selling transactions is T+2.

Turn-around trades are not possible in the Egyptian market. However agency clearing is permissible.

Central Bank of Egypt - regulates the banking industry, cash clearing and settlement.

Banque Misr- used by MCDR as a cash clearing bank for purchases and sales of listed securities.

The National Bank of Egypt - also used by MCDR as a cash clearing bank for purchases and sales of listed securities.

Other banks used by MCDR for cash clearing purposes are National Bank of Egypt, Arab African International Bank, United Ahli Bank and Piraeus Bank, as the cash clearing banks pertaining to purchases or sales of listed securities. Each counterparty must maintain a securities account and a cash account with the respective entities.

Misr for Central Clearing, Depository & Registry (MCDR) - is the national depository as well as the securities clearing agent for listed securities (physical and book-entry). MCDR was incorporated under Capital Market Law No. 95 and its Executive Regulations became operational in October 1996 as Egypt’s official central clearing house and central depository. MCDR is regulated by FRA and has the following ownership structure: 45% brokerage firms; 5% stock exchange (EGX); 50% local custodians.

MCDR participants maintain safekeeping accounts at the depository. The participants hold assets on behalf of their customers. Under the current structure, each participant maintains an omnibus account with the MCDR, while maintaining beneficial ownership level accounts via an online connection with the MCDR, a depository requirement that allows for standardisation of the provision of beneficial ownership information to the depository.

The Central Bank of Egypt - acts as the sole depository and clearing house for treasury bills. Holdings are segregated on the Central Bank's books at the level of the bank's propriety position and the bank's client's position. Segregation at the beneficial owner level is only evident on the local subcustodian's books.

Account Structure

As per market regulations in Egypt, it is mandatory that segregated accounts should be opened in the name of the beneficial owner. Omnibus securities structures are not allowed.

However, investors can either open an omnibus or segregated cash accounts, as there are no restrictions or special terms for cash account opening at market level.
The Client may open either an omnibus cash account in its name to which all securities accounts will be linked or the Client may open and utilize different cash accounts which can be linked to each Investor’s securities sub-accounts. However, the linked cash accounts will remain in the name of the Client rather than the underlying investor.

BIS is an international organisation which fosters cooperation among central banks and other agencies in pursuit of monetary and financial stability. The Committee on Payments and Market Infrastructures (CPMI) uses three common structural approaches, or models, to categorise the links between delivery and payment in a securities settlement system.

Not applicable.

Book-Entry: Depository-eligible securities are registered upon settlement.

Physical: The issuing company's registrar initiates registration upon receipt of the share certificates and document of title (Certificate of Ownership). Securities are registered in the name of the beneficial owner, a process that can take from one to four weeks.

The process of registration for physical shares takes approximately four weeks. Each physical certificate has a 'registration grid' printed on the reverse side. Misr as the clearing and central depository updates the registration grid with the name of the beneficial owner as it appears on the Certificate of Ownership (COO) and affixes the company stamp in order for the re-registration to be effected.

Certificates of Ownership are documents of title. They are produced by the MCDR (physical securities clearing agent) in the name of the beneficial owner, for each new buyer of shares in the Egyptian market. COOs are required in order to sell the shares that have not been registered.

While registration is not required for the protection of entitlements, and certificate of ownership is the legally binding document for protection of entitlement, some companies require that the shares are registered as a part of the entitlement payment process. Furthermore, most companies require that the shares are registered in order to vote at Annual General Meetings (AGM).

Securities deposited at MCDR are registered with each issuing company in the name of MCDR as nominee. Issuer records are updated at beneficial-owner level for voting purposes. Upon instruction from an issuer, MCDR will provide the issuing company with shareholders' positions on the effective date. Registration of physical securities takes place within two business days and dematerialised securities are registered by default.

Misr for clearing and Central Depository.

Registration of physical securities takes place within one - four weeks and dematerialised securities are registered by default.

Broker Authorisation Form

Egyptian Market regulations require that local brokers request custodian banks to block securities before executing a sale trade based on an order placed with that broker by the client. Through this document, the Client authorises Citi Citibank N.A. Egypt to block securities on the Client's account at Misr for Central Clearing Depository & Registry (MCDR) on behalf of the authorised local broker.

A list of all of the brokers with membership of the Egyptian Stock Exchange is available; please see the following link to the Misr for Central Clearing, Depositary Registry, http://www.mcsd.com.eg/mcdr/English/company.aspx?kindid=1

The Authorisation document may be completed with the names of the specific brokers, or a blanket authority may be provided in respect of all Egyptian Stock Exchange member brokers. Please complete this document on company letterhead.

The Client may also choose to include all sub-account holders (investors) in the letter to provide blanket coverage in respect of investors under its Main Account to avoid the requirement for each of the sub account holders to also sign the Letter individually. To effect this, when signing the Letter, Client should ensure that along with the Company name in the bottom of the document to add "and all underlying sub accounts" or words to that effect.
If the Client has not included the Investor in their broker authorisation letter, the Investor is required to complete the broker authorisation letter.

Share holdings may be required to be disclosed by the beneficial owner, particularly when holdings reach or exceed prescribed disclosure limits. Investors must ensure that they comply in full by reporting such holdings to the appropriate organisations for this market, within the timeframe required. If you have any questions regarding this issue we encourage you to consult your legal counsel.

Article 8 of Capital Market Law 95 for 1992 stipulates the following:

-If the issuer company was publicly offered, the investor (a board member or an insider) has to inform the exchange, FRA, and the company if he intends to increase or buy a stake of 5 per cent or its multiples in a company (two weeks before the transaction). In the case of a normal investor and not a board member or an insider, the threshold is 10 per cent. The company, in return, notifies all the shareholders who have more than 1 per cent.

-For listed companies, the threshold is stipulated by Chapter 3 in Article 332 and 333 of the executive regulations of Capital Market Law 95 for 1992, and it states the following:

-Any person acquiring 5 per cent of the share capital or voting rights or its multiples of a listed company, or offered its shares to the public though not listed and not exceeding one third of such a company, has to disclose such acquisition to the Egyptian Stock Exchange and the FRA within two working days as of completion of the transaction. The notice has to identify the name of the acquirer, his holdings post-transaction, the name of the brokerage company and the name of the related parties

- In case the acquisition reaches 25 per cent and does not exceed one third of the capital or the voting rights of the company, the acquirer has to disclose his future investment plan in respect of the management of the company, if any

- The same rules apply if the acquirer is a board member and acquires 3 per cent or its multiples of the shares of such companies

- A mandatory tender offer has to take place if the client's acquisition in a company reaches 33 per cent or more

- Violation by the underlying investor will result in the cancellation of the transaction in question. Failure for a shareholder to disclose the necessary information would lead to fines not less than EGP2,000 and not more than EGP10,000 as documented under Law 95 for 1992, Article 67. In addition, article 21 of the said law shall apply, which stipulates that the chairman of the stock exchange may cancel any transactions that are effected in violation of the provisions of the law and its executive regulation.

Buy-In is enforced by the Settlement Guarantee Fund (SGF) which operates through the Depository (MCDR). 

For purchase transactions 

-On T+1, Local custodian has to accept the obligation for all matched trades on the MCDR screen by maximum 2 p.m. Cairo Time, where instructions are in place, valid, and with the appropriate funding by 10:30 a.m. Cairo Time.

-On T+1 by 10:30 a.m. Cairo time, for instructions that fall under the following scenarios, the local custodian will not accept the obligation, which means the obligation for such transactions will automatically go to the local broker, and they have the option to fund the trade instead:

1. Missing/wrong instructions
2. No funds
3. Wrong execution
4. Not our client

-Where the local custodian has not accepted the obligation, the shares will be pending on the MCDR system, available for acceptance by the local custodian once the instructions are in place. Where instructions/funding have been received after the settlement cycle, the local custodian will settle the transaction on their records, and credit the full amount to the local broker account (who has funded the trade initially). (Late confirmation penalties may be imposed by the local broker to the client.)

In case where the local broker refuses to fund the transaction on behalf of the client on T+2 and presents the relevant supporting documentation to the Settlement Guarantee Fund (SGF) to prove the trade is valid, SGF will step in to lend the relevant trade amount to the seller and will start calculating a daily penalty on the buyer till settlement. The claim must be paid within 5 business days from the date it is charged.

For sale transactions 

-On T+1, Local custodian to accept the obligation for all matched trades on the MCDR screen by maximum 5 p.m. Cairo Time, where instructions are in place and valid by 10:30 a.m. Cairo Time.

-On T+1 by 10:30 a.m. Cairo time, for instructions that fall under the following scenarios, the local custodian will not accept the obligation, which means the obligation for such transactions will automatically go to the local broker:

1. Missing/wrong instructions
2. Wrong execution
3. Not our client

-where the local custodian has not accepted the obligation, and instructions have been received late after the settlement cycle, MCDR will credit the sale proceeds net of any penalties imposed by the SGF to the local custodian. Local custodian will calculate the total local broker commissions based on the invoices on the settled transactions and credit them to the local broker accounts.

In case where the local broker has not provided the supporting documentation to prove trades executed are valid, all penalties will be imposed on the local broker. A buy-in will take place by the SGF on T+5, and the price difference will be charged to the local broker, along with the penalties.

Claims/Penalties process:

-SGF penalty will be calculated at 0.5% of the trade amount for each day settlement is delayed.

-Buy-in takes place on T+5 by the SGF, and any price differentials are charged to the defaulting party.

-For late settlement of sale trades, sale proceeds are credited less the penalty amount.

-For late settlement of purchase trades (where the local broker has refused to fund the trades), the penalty amount will be charged separately and must be paid within 5 business days.

Refer to Short Selling section for details. 

There is a Settlement Guarantee Fund (SGF) in place to settle the outstanding obligations of a defaulting broker. The liability of the fund will be limited to the amount of total cash contributions of brokers and the guarantee of the concerned broker. The SGF is under the responsibility of the Central Depository.

Information not available

This is an FII market. Please contact your RBC Investor Services' Client Manager before making portfolio investments.

New presidential decree by law 95 for 2015 amending law 14 for 2012 to allow foreigners to own up to 45% of companies incorporated in the Sinai Peninsula, this is subject to specific market approvals.

There are no regulatory restrictions that limit foreign participation in the market or prohibit the repatriation of profits. However, there are few exceptions to this rule as some companies' charters do not permit foreign shareholders.

Some companies are bylaw applying restrictions on foreign investors participation.

Clients refer to local broker to be aware of the list of those companies

Cancelled depository receipt sale proceeds are excluded from the CBE guaranteed repatriation mechanism.

Effective December 3, 2016, the Central Bank of Egypt announced the free floating of the Egyptian pound. The interbank market has also been reactivated, 10:30 - 13:30 (local time) daily.

Effective December 3, 2016, the Central Bank of Egypt announced the free floating of the Egyptian pound. The interbank market has also been reactivated. 

All transactions must be related to securities proceeds. There are currently two FX modules in Egypt, namely; the old mechanism/ interbank and the new Central Bank of Egypt (CBE) guaranteed mechanism, whereby the latter has been introduced on 17 March 2013 for foreign investors to

repatriate their funds through the CBE with a premium. In other words, the CBE added a new option for the foreign investors to repatriate directly with the CBE in case they wish not to stand in the old mechanism queues, but at a higher price, provided that clients have originally obtained their EGP through the same mechanism.  As for the old mechanism, an auction mechanism was established by CBE in 2012 through which banks can bid for certain percentages of the total auction amount and the allocation took place on pro-rata basis. As of 3 November 2016, CBE suspended the auction mechanism on the back of the current free-float regime being applied in the Market.

Effective December 3, 2017, CBE announced changes to the repatriation mechanism (Foreign Investors Fund – FIF). Following the changes made to the spreads, clients have the option to come out of the CBE repatriation mechanism that was set up to guarantee the repatriation of funds. As a result, clients have the following two options:

• Continue as per the default process set up in 2013, for FX requests to be routed under the CBE repatriation mechanism.
• Go through the interbank market.

CBE terminated the CBE repatriation mechanism. This applies to listed securities on the EGX, treasury bills, treasury bonds and corporate bonds. Effective December 5, 2018, any new FX inflows will be routed through the interbank market.

Kindly note the pricing models as below :

CBE FX Mechanism:

Client Buying EGP selling FCY (USD) - the price announced on the CBEW1 page on Reuters at 2.00 pm Cairo time (CBEW1 Bid Rate) on the trade date   ‘less’ 100 pips spread for the sub custodian (less applicable swap points), and 1% to CBE as a premium effective November 2017.

Client Selling EGP buying FCY (USD) - the price announced on the CBEW1 page on Reuters at 2.00

pm Cairo time (CBEW1 Offer Rate)  on the trade date . There will be a 0.5 per cent spread added to the CBEW1  offer rate (spread goes to CBE), and there will be no additional spread added by the local

subcustodian bank.  Investors will receive their FCY for spot value (I.E ASD+3).

Pricing methodology and applied spreads are all mandatory and dictated by the Central Bank.

The interbank market is quite volatile, the average daily volumes are around USD 80-100MM, but no official figures are announced.

Interbank market does not guarantee repatriation in case of no liquidity.

There is no fixed spread for interbank as market is dynamic and it depends on several factors i.e. demand and supply, market etc.

Up to four business days operational/technical overdraft can be arranged for foreign investors.

• Dividends are paid semi-annually or annually. Entitlements are based trade date position of record date.
• The MCDR being the sole paying agent for corporate events only pays out corporate action proceeds upon settlement, which by default eliminates any claim process that can be triggered.
• Depository Eligible Shares: On Credit Date (Pay Date +2) the MCDR credits custodian's account held with the CBE. Cash is credited to the beneficial owner's cash account upon actual cash receipt.

Annual / semi-annual

Interest on government bonds can be paid semi-annually in EGP through the MCDR for dematerialised bonds.

Net interest on corporate bonds can be paid quarterly, semi-annually or annually in EGP through the MCDR. 
Income on USD-denominated bonds listed on the EGX is paid in USD.

Actual

The most common corporate actions in Egypt are:

• stock/cash dividends
• stock splits
• rights issues

Corporate actions are typically effected annually in either June and July or December and January after fiscal year-end of issuers on December 31 or June 30.

All rights are entitled according to trade date position, where reconciliation is done with the CSD prior to affecting any payment.

Unrestricted voting rights

Yes, three business days before the annual general meeting, then unblocked on meeting day after the trading day is over.

Yes, three business days before the annual general meeting, then unblocked on meeting day after the trading day is over.

Regularly sent after the meeting is held.

Not available

Required

Not applicable

Cash dividends are taxable with effective July 2, 2014, dividend tax as follows:

• Cash dividends - 5% deduction at source taxes applied on cash dividends on listed stocks (10% prior to October 1, 2020). The rate remains at 10% for unlisted securities.  
• The tax will be deducted from source.

MCDR is coordinating, along with the Egyptian Tax Authority, the implementation of the double taxation treaties on Capital gains and  cash dividends taxes. In that respect, they are preparing a full database for foreign clients investing in the Egyptian capital market and their eligibility for the reduced rates. Accordingly, they requested the sub-custodians to collect a notarized and consularized Certificate of Tax Residency (COTR) in addition to the Certificate of Beneficial Ownership (CBO) from all clients to be then provided to the MCDR. It is worth noting that clients who do not submit the said documents will not be eligible for the reduced tax rates. We suggest that clients seek further advice from professional tax consultants/advisers in that respect as subcustodian does not assume any responsibility with regard to tax-related issues since it is not part of our provided services.

To send subcustodian the required documents, clients are requested to send an additional cover letter on the client's letterhead that includes the following details:

***************************

• Client name
• Unified code
• Sub-Custodian name
• Country of domicile
• COTR number
• Tax year
• Subcustodian account number

Clients should complete the CBO form in accordance with the below:

• Clients are advised to use the provided template for the CBO as this was recently accepted by the

ETA

• Both English and Arabic sides of the document should be completed
• The client name should match the name set up in the market in accordance with the unified code
• The document must be provided in original form on the client’s letterhead, signed by an

authorised signer and stamped with the company/fund stamp

• It is worth highlighting that the CBO will be subject to the Tax Authority’s review and approval
• No legalisation has been requested so far by the ETA for the CBO

Withholding tax applies on treasury bills and treasury bonds sale trades and redemption/coupon payments at a default rate of 20 per cent. Double Tax Treaty rates may apply if the client completes the Withholding Tax form and any documents that may be required at the time. The WHT on T-bills and bonds is calculated on maturity date or actual selling date.  The WHT is calculated based on the difference of face value to purchase price/number of days to maturity representation the daily accrual  realised by the investor’s holding period.

Capital gains are taxable with effective 2 July 2014, it was calculated by MCDR and deducted from source, while clients are notified with the applied CGT through the local broker invoice, please note the related information as published in the MCDR https://www.mcsd.com.eg/mcdr/english/

The Egyptian government has decided to put the 10% tax on capital gains on hold for two years effective 17 May 2015, while MCDR refunded to clients capital gains taxes deducted from the period of 17 May 2015 till 24 August 2015. Suspension on CGT was further extended until 17 May 2020, noting that the 10% tax on stock dividends remains in effect.

In March 2020, the government permanently exempted capital gain tax (CGT) on equities for non-residents. 

MoF issued directive number 610 for the year 2020 which introduces the applicability of Capital Gain Tax (CGT) on capital gains derived on unlisted equity stocks by non-resident investors effective on 14 December 2020:

• Non-resident entity investors (e.g. fund, Company, etc.): Capital gain will be subject to a rate of 22.5%
• Non-resident individual investors: Capital gains will be subject to rate range of 0% to 25%

All information regarding the double taxation agreements is on the official web-site http://www.incometax.gov.eg/treaties.asp

Transactions conducted on EGX for both buyers and sellers will be subject to stamp duty. Both the buyers and sellers will pay the full rate.

Stamp duty applied in stages as follows:

• At 0.00125 during the first year for each of the buyer and seller until May 31, 2018.
• At 0.00150 during the second year for each the buyer and seller from June 1, 2018 to May 31, 2019.
• At 0.00125 effective trade date October 1, 2020. 

Stamp duty will be applied on all listed and non-listed Egyptian or foreign securities. Equities and corporate bonds will be impacted by Stamp Duty. Treasury Bonds, which are traded in EGX and settled at MCDR will not be impacted by Stamp Duty. Deductions are to be applied by MCDR that will accordingly transfer the stamp duty tax to the Egyptian Tax Authority.

A 0.3% levy will be applied on investors acquiring 33% or more of shares or voting rights in a resident company for each the buyer and seller, as well as a 0.3% levy for investors acquiring 33% or more of the assets and liabilities of a resident company by another company for each the buyer and the seller.

Egypt Holiday Calendar

• Egyptian Stock Exchange egx.com.eg/English
• Nile Stock Exchange nilex.com.eg/en
• The Central Depository mcsd.com.eg/mcdr/english
• Ministry of Investment investment.gov.eg
• Ministry of Foreign Trade mfti.gov.eg
• Egypt State Information Service us.sis.gov.eg
• Egyptian financial Supervisory Authority www.efsa.gov.eg