Hedging Mechanism Awaits Egypt’s FSA Approval; Says MCDR Chairman

Egypt’s Securities Depository Center Chairman announced on Tuesday the completion of all preparations for the new Hedging mechanism.

The Chairman of Misr for Central Clearing, Depository and Registry Mohamed Abdel Salam said the MCDR  has finalized all the preparations made for the new mechanism noting that it awaiting the ratification of Egypt’s financial regulator – the Egyptian Financial Supervisory Authority (EFSA).

The MCDR chairman further stated that the hedging mechanism will enable the investors to hedge against the low price of securities in the market and to secure their investments in stocks. Through the Hedging mechanism, the client would lend his securities to the MCDR’s lending fund; the latter shall provide another investor with the same number of securities that are to be sold. The MCDR’s lending fund would then keep the sale value till the client asks to restore his securities and settle the transaction.

Meanwhile, a number of market experts asserted that, If the price drops, the new mechanism will enable the investor to buy back the stock at the lower price and make a profit on the difference. But If the price of the stock rises, he has to buy it back at the higher price, and he lose money.