Depository and Central Clearing and Registry of Securities

Central depository activity means any activity related to depositing and registering of securities, clearing and settling financial positions arising from trading operations and recording mortgage rights thereon.

Central registry activity means any activity related to keeping records of securities ownership and mortgage rights recorded thereon, including:

• Keeping records of the names of shareholders and other securities and the rights and obligations thereon.
• Distributing dues resulting from securities kept by the company, including principal, return, dividends, redemption values ​​and restructuring payments.
• Publishing reports and information disclosed by the entities issuing the securities or related to those securities.
• Providing services related to issuing securities on behalf of the issuer.
• Taking the necessary measures to replace securities while restructuring the entity.

Misr for Central Clearing, Depository and Registry Company

Misr for Central Clearing, Depository and Registry is a headquarters representing the state where traded securities and investor codes are registered. It is considered a center of security and guarantee for investors’ rights and a center for settling securities traded between traders in the market.

The company was established under the provisions of Article 130 of the Executive Regulations of Capital Market Law No. 95 of 1992, as a joint stock company. The main purpose of incorporating and establishing the company was to carry out the activity of clearing and settling transactions made on securities on the stock exchange market and to implement the central holding system for securities. Law No. 93 of 2000 and its executive regulations were issued to regulate the central depository and registration of securities.

Objectives of the central depository system

1. Eliminate the risks resulting from dealing through securities in the stock market, such as their exposure to damage, forgery or loss.
2. Achieving central holding of securities through the gradual withdrawal of securities traded in the market.
3. Facilitating the movement of trading on the stock exchange as a result of dealing on balances and books instead of material securities.
4. Speed ​​of capital turnover as a result of completing the ownership transfer process at fixed times.
5. Increasing liquidity in the market.
6. Implementing settlements through applying the principle of delivery versus payment (DVP).
7. Exempting the issuing entities from the cost, effort and time required for the process of printing capital certificates and sufficing with one certificate with the total value and quantity of issued shares (the giant share).
8. Establishing a database for all issued securities that are traded in the Egyptian stock market.
9. Establishing a database that includes all securities’ owners and their data.
10. Increasing investor’s confidence as a result of following international standards in settlement.

Objectives of the central registration system

• Establishing a unified, complete and correct database that includes data of all securities owners in the market and managing this database by a single central entity through an automated system that keeps pace with global systems.
• Simplifying the procedures for paying profits to shareholders and other operations approved by the issuing entity in the general assembly (free distributions – subscription, etc.).
• Contributing to increasing the transparency rate in the market by publishing the information that the issuing entity wishes to disclose.
• Simplifying the procedures for amendments that occur to the capital by amending the nominal value, whether by increase or decrease, and any resulting changes to shareholders’ balances.
• Simplifying the procedures for mergers, acquisitions and concealment.

Central depository and registration entities

• Banks and bank branches registered with the Central Bank and licensed by the Financial Regulatory Authority to practice the activity.
• Companies operating in the field of securities according to the activities determined by the Board of Directors of the Financial Regulatory Authority.
• Foreign companies and entities that practice the activity of central depository of securities, provided that their main office is subject to supervision in accordance with the rules determined by the Board of Directors of the Financial Regulatory Authority.
• Other entities whose membership is accepted by the Board of Directors of the company, in accordance with the terms and conditions determined by the Executive Regulations of Law 93 of 2000.

Relationship between the investor protection fund and the central depository and registration systems

After the issuance of the Central Depository Law and its Executive Regulations, all companies with securities listed on the Stock Exchange Market are obligated to deposit their issues listed on the Stock Exchange in the Central Depository System to put an end to the physical shares from the dictionary of trading on the organized Stock Exchange, where all shares and bonds listed on the Stock Exchange tables are traded using book account systems, and physical delivery of stock or bond certificates does not take place between dealers in securities listed on the Stock Exchange, but additions or deductions are made to the accounts of securities of dealers with custodians.

Since that date, it has become necessary for the investor to contract with a custodian to deposit their non-physical securities with the custodian, as in the case of opening a current account with any commercial bank to deposit your cash in the form of banknotes of 200 pounds, 100 pounds, 50 pounds, or others, and then there is another financial institution other than the brokerage company that you must deal with if you wish to buy or sell securities listed in the stock exchange or subscribe to the increase shares or obtain free shares.

Custodians licensed by the Financial Regulatory Authority are obligated to receive and deliver the securities of their clients in the event that they issue purchase or sale orders for their securities deposited with them, in addition to collecting coupons and receiving new shares in the event of subscribing to the increase shares or receiving free stock distributions or stock splitting, in addition to other activities that may be included in the terms of the contract and cannot be practiced except after registering the physical securities in the central depository with the custodian, provided that the issuing entity deposits its securities with the central depository and registration company.

According to this regulation, custodians are obligated to be members of the Investor Protection Fund to provide additional protection for those dealing with custodian companies and commercial banks licensed to practice this activity. This protection is represented by the Investor Protection Fund providing partial or full compensation to the investor who loses his securities deposited in the book, with a maximum of five hundred thousand pounds for the client, including the securities that the client deals with the member, as well as the cash balance credited to the account resulting from the client’s transactions in securities with the member, not exceeding one hundred thousand pounds.

There is a strict electronic regulation to track the securities registered centrally and deposited with the Misr Clearing, Depository and Central Registry Company, as all securities and financial settlement operations related to them are carried out through it, as all paper movements between sellers and buyers are recorded through it, and it performs the book deduction of the sold securities from the seller’s account with the custodian.