Egypt’s House of Representatives voted on Sunday in favour of amendments to the central depository and registration law (law number 93 of 2000), in an initial vote on the law.
Parliamentary speaker Ali Abdel-Aal said the law is a technical one that aims to facilitate the settlement of contracts on the stock market and the issuing of treasury bills and bonds.
The amended law, as approved by parliament, will be referred to the State Council to be revised in constitutional and legal terms before it is put up for a final vote in parliament, he said.
"The amended law also seeks to go in line with the laws regulating the performance of joint-stock companies and the capital market, and so this law needs professional experts to be correctly and skilfully implemented, and if we do not have such experts, we could face many problems, not to mention that as far as I know many countries have faced a lot of difficulties in implementing the new electronic system introduced by this law," said Abdel-Aal.
A report prepared by parliament's economic committee and legislative and constitutional affairs committee said the 60-article law forms the basis of the performance of the stock market and that it is critical for creating a more investment-friendly climate in Egypt.
"This law, passed in 2000, is a turning point in the history of the Egyptian stock market. It led to transforming trade operations on the stock market from manual to electronic," said the report. The amendments, the report said, aim to achieve a number of objectives.
"First, they are meant to be in line with the 2015 amendment of the joint stock company law (law number 17 of 2015) which made trading of the shares of these companies (numbering 130,000) governed by the central depository and registration system," read the report.
"Second, they aim to be in harmony with the 2018 amendments of the capital market law which led to the creation of the future contracts bourse, which will also be regulated by the central depository and registration system.
Thirdly, the amendments open for privatisation of the central depository and registration process.
"Right now, one company, the public sector Misr Maqassa is monopolising the business in this sector. With the new law, this will no longer be the case. Private companies will be allowed to join," read the report.
Government financial securities, which are issued by the Central Bank of Egypt on behalf of the finance ministry, will be monopolised by a company fully owned by the central bank and licensed by the Financial Regulatory Authority.
The government’s explanatory note on the law said the amendments regulate the activities of clearance and settlement of financial securities "and this is necessary for settling the legalities of trading in financial securities and the rights and obligations of those who do business in this sector.”
When the amendments came up for debate for the first time in a meeting held by the economic committee on 20 October, Abdel-Hamid Ibrahim, an advisor to the chairman of the Financial Regulatory Authority, explained that the goal of the amendments is to help attract more investments to the stock securities market in a manner that could positively impact the international credit rating of Egypt.
“The new amendments do not affect in any way the existing entity which is in charge of the clearance and settlement system, since it is internationally recognised,” Ibrahim noted.
The meeting saw much debate on Article 35, which allows the central bank to monopolise business in treasury bonds and bills via a joint-venture company to be formed for his purpose.
Article 35 also states that the Financial Regulatory Authority is the entity officially authorised to license joint-venture companies to do the business of the clearance and settlement of contracts concluded on the stock market. The article lists all the requirements that must be first met for joint-venture companies to obtain an official licence.
Ashraf El-Araby, deputy chairman of parliament’s economic committee, said that since the amendments are closely related to the investment and capital market, the committee was keen to hold intensive discussions on each of its individual articles, to ensure it will positively impact the country’s economic and business climate.