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EFSA reintroduces same day EGX settlements from 23 May

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T+0 more like gambling than trading, says one expert

On the Nile stock exchange, the Mediterranean Company and Pioneers Holding ranked joint highest in total amounts of stock traded. (AFP Photo)

The Egyptian Financial Supervisory Authority (EFSA) has decided to reintroduce T+0, or same day settlements on the Egyptian Exchange (EGX) starting from Thursday 23 May
(AFP Photo)

By Lamia Nabil 

The Egyptian Financial Supervisory Authority (EFSA) has decided to reintroduce T+0, or same day settlements on the Egyptian Exchange (EGX) starting from Thursday 23 May, according to an EFSA statement made on Tuesday.

T+0 settlements give traders the option to sell or buy all or part of the shares which they have already bought or sold during the same trading session. T+1 settlements, for example, allow traders to do the same, but only after the trading session has ended.

Halting T+0 settlements was a precautionary measure that EFSA introduced after the 25 January Revolution in order to shore up capital on the nation’s stock exchange after its 55-day closure during and after the revolution.

Others included T+1 and T+2 settlements, the reduction of price limits, margin trading, and short-selling.

“EFSA is attempting to remove these precautionary measures one by one,” said Chairman of the Board of Directors of the Egyptian Arabian Company for Securities Brokerage (Themar) Adel Abdel Fatah. “I have concerns regarding this settlement usage, however, and that is that in the short term it [T+0] will boost the EGX’s capital but in the medium to long term, investors will lose their money and will exit from the EGX.”

“The reason is that T+0 is more like gambling than trading,” he added.

Economist Ahmed Al-Outafy predicted that the reintroduction of T+0 settlements will increase EGX capital by 15%.

Al-Outafy also believes that the recently-introduced 0.001% tax on all transactions will, with the reintroduction of T+0 settlements and short-selling, only benefit the Ministry of Finance.

“The EGX is not deep enough to accommodate frequent transactions like these during the same trading session,” he said. “There is currently nowhere near enough liquidity.”


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