The in-the-works stamp tax on EGX transactions should be put into place starting September, replacing the previously planned capital gains tax, a government source told EnterpriseAM. As the tax is on daily transactions, the new system can be put in place any time in a fiscal year, they added.

But to sweeten the deal, the EGX has asked for the bill to be put on hold as it readies a set of incentives to accompany the tax, two government sources told us. Meetings are ongoing to introduce amendments to the tax, investment, and capital markets laws that will cushion the impact of a stamp tax by introducing incentives to encourage more companies to list on the exchange and for others to increase their market capitalization, one of the sources told us. Once ready, the amendments will be submitted to the House for a vote.

Simplifying how the EGX works is also part of the plan, with the EGX and Financial Regulatory Authority currently working on simplifying procedures to encourage more listings, raise liquidity, and improve trading activity, another government source told EnterpriseAM. The plans also include updating how investment accounts are funded — whether via brokerages or investment fund subscriptions — and introducing new safeguards to protect the rights of minority investors through amendments to the executive regulations of the Capital Markets Act.

Changes to the EGX will also include the launch of a retail bond market, aligning with what we’ve heard previously from government sources on efforts to diversify public debt instruments. The move — which we were told is being backed by the World Bank — would allow individuals for the first time the option of purchasing government debt instruments and reduce the government’s debt service payments, we were told.

Retail bonds? A government-issued retail bond is debt that is sold directly from a government to individuals. Countries issue retail bonds like the US Savings Bonds and UK Premium Bonds as a way to borrow money from the public in exchange for interest payments or some other type of return. Unlike some other forms of debt, government-issued retail bonds are stable, predictable, and often cheaper, with the added benefit of being an effective monetary policy tool if need be.

Futures contracts will also make their entrance into the EGX, with one of the sources telling us that they are working to amend the Capital Markets Law to open the door to the derivative and tradable sukuk. Futures and the derivatives market more broadly has been on the EGX’s radar for some time, with Financial Regulatory Authority Deputy Chairman Islam Azzam saying last year that they planned to launch the addition by June of this year.

But what are derivatives exactly? Derivates are financial contracts that are tied to the value of an underlying asset — think stocks, bonds, commodities, or an index. Futures are a popular form of derivative where traders agree to buy or sell an asset on a fixed date in the future. Futures contracts let investors hedge against volatile price movements and bet on where the market will go — but they are also an inherently risky tool that can maximize returns and also losses.

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