Attention, brokers and traders: The Financial Regulatory Authority (FRA) has introduced a group of changes it says aim to cap risk in the system:

The lowdown:

  • Riskier clients will do more KYC: Individual clients will be rated high-, medium-, or low-risk by brokerage firms. The information of high- and medium-risk clients will have to be updated every two years at most, while that of low-risk clients will need to be updated every five years.
  • Brokerages face a new capital adequacy requirement that demands they have at EGP 15 mn worth of capital, up from EGP 5 mn. Companies have six months to hike their capital and can apply for another six-month extension.
  • There’s now a lower cap on how much any one client can borrow from a brokerage for margin trading: No individual can account for more than 10% of a brokerage house’s margin trading pool. In cases where a margin client is also trading through vehicles over which they have control, the combined figure goes up to 15%. That’s a 5-percentage-point cut for both categories.
  • Securities as collateral: The amendments also allow clients to place owned securities as collateral for those they want to buy on margin provided the former are valued at no less than 100% of the securities they want to purchase.
  • Simpler coding procedures for foreign funds are in the pipeline, but the statement doesn’t unpack what those procedures could mean in practice.
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