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It’s an important step to develop the financial markets in Egypt with launched derivatives trading before the end of 2022.
The Financial Regulatory Authority announced that, by the end of the year 2022 for the first time, investors are able to buy and sell derivatives contracts on the Egypt's stock exchange (EGX).
Derivatives are one of the three main categories of the financial instruments, the other two are equity (i.e. stocks or shares) and debt (i.e. bonds and mortgages), some of the more common derivatives include forwards, futures, options, and swaps.
What is the Futures Exchange, It's a deal in the future where a buyer and a seller exchange an asset at a future date at a price they both agree upon in advance.
The plan of Financial Regulatory Authority to launch a financial derivatives exchange:
The main shareholders are The Egyptian Stock Exchange, the Central Bank of Egypt and Misr Clearing Company, provided that the rest of the shares are for institutions in the market such as banks, insurance companies, and investment banks.
Futures Exchange is the first step for the new stock exchange, which will take place in phases.
Futures Exchange and the Real Estate Market
The real estate market is very sensitive to changes in raw materials prices. This is due to the fact that the most popular model in market depends on off plan sales, thus, the developer should handle the risk of price increase in the future. These risks are usually estimated within the target prices, yet, these estimates are being unexpected in the case of significant changes, as happened in 2016 as well as at the beginning of 2022. Futures Exchange is the safe alternative to hedge against the risks of increasing the prices of basic materials as well as currencies. The developer will be able to estimate the risks according to his future plans.
With the development of the derivatives market in Egypt and allowing the trading of options contracts, the developer can secure raw materials such as (rebar, concrete, aluminum, cables, etc.) from the beginning of any project and save future contracts for all its requirements from day one. This ensures market stability and encourages safer investment, under the shadow of the calculated risk.
Investors in the Futures Exchange Target