Why the EGX30 futures market hasn’t taken off yet

Why EGX futures haven’t taken off yet: When EGX30 index futures went live in March (coinciding exactly with the outbreak of the Iran war), both the bulls and skeptics said the same thing: give it time. Three months in, the product — billed the single biggest upgrade to the EGX’s market architecture in a decade — is averaging a handful of trades a day, with the EGX rolling out single-stock futures in a move that almost recognizes the mismatch between the first index-tracking product and buy-side interest.

SOUND SMART- EGX30 index futures are contracts to buy or sell the bourse’s benchmark index (which includes the EGX’s 30 most liquid listed companies) at a predetermined price on a specified future date. So far, they only come in two flavors: a three-month contract (more liquid and suited to short-term positioning) and a six-month contract (geared toward longer-term hedging). The multiplier is set at EGP 1 per index point, a deliberate play to lower the bar for entry, support liquidity, and enable more precise hedging.

By the numbers: Combined daily turnover across the three- and six-months contracts came in at EGP 641.1k yesterday, a sum the stock market could eclipse in under an hour. Four trades changed hands all day, split evenly between the June and September contracts. By the close, neither contract had a live bid or ask on the screen.

The reasons for the slow start run deeper than the war-clouded market. Local investors have historically preferred backing names they know rather than buying a whole basket of them. The institutional and foreign investors the product was designed for aren’t meaningfully in the market, and retail doesn’t understand it. With market-making still thin and T-bill yields so high that posting margin carries a steep opportunity cost, derivatives are competing with themselves as much as with investor appetite.

Index-linked investing doesn’t have a stellar record here: “People like to buy stocks directly to form a concentration,” Hany Genena, head of research at Al Ahly Pharos, tells EnterpriseAM. When the bourse first introduced exchange-traded funds (ETFs) tracking the EGX30 in 2014, volume never materialized, and the product quietly faded, he adds. Even though the mechanics of futures are different, the underlying behavioral preference is the same. Local investors, retail and institutional alike, want exposure to names they know and have a view on — an index product gives them neither.

There’s a real market-making problem too: “People are afraid that there will be friction due to the absence of sufficient bids and asks,” Genena says. In a thin market, that fear becomes self-fulfilling — investors hold back because they’re worried there won’t be a counterparty, and the absence of participants ensures there isn’t one. The index-tracking ETF ran into exactly this loop, and so far, EGX30 futures look like they may be running into it too.

Pundits are counting on awareness to turn into flow: Volumes will pick up once investors become more familiar with the product, Tasweyat CEO Khaled Amer, whose firm clears and settles all futures transactions on the EGX, tells EnterpriseAM. “The early stages of any derivatives market are typically characterized by gradual adoption as investors, brokers, and market participants familiarize themselves with the product and the associated operational processes,” Amer says. “While volumes remain modest, this is not unusual for a newly-launched market,” he adds.

No hedgers, no hedges

A hedging product can only do so much if the investors it is built for aren’t trading. EGX30 futures were designed with institutional and foreign investors in mind, but so far neither group is showing up in the numbers. The product’s main selling point is its ability to hedge large equity portfolios without forcing investors to sell underlying positions. But that only works if you have sizeable institutional portfolios to hedge in the first place, as well as enough market participants with the systems, mandates, and appetite to trade derivatives alongside their cashholdings.

Foreign participation in the Egyptian market remains a fraction of what it was before the 2022 FX crisis: “The overall percentage of foreign investors in the Egyptian market is currently quite low compared to what it used to be,” Amr El Alfy, Thndr’s head of equity, tells EnterpriseAM. “The driving force in the market so far is mainly retail, specifically Egyptian retail.” Foreigners accounted for 15.4% of the total traded value in listed stocks in 4Q 2021, a share that dropped to 5.4% by 4Q 2025, according to EGX data.

Local institutions face their own constraints. Pension funds and ins. companies, the natural long-term users of hedging instruments, operate under mandates that in many cases don’t yet permit leveraged positions, Genena told us in March. Fund managers that might want to use futures often can’t because their investment policies haven’t caught up with the market’s new products.

Any retail takers? “Retail investors typically do not use futures at all,” El Alfy says. The platform with arguably the widest reach into Egypt’s retail investor base hasn’t activated futures trading on its app yet. “We are not pushing for this right now because trading futures requires a specific license,” he explains. “We are currently still talking about basic investor education for stocks or equity trading. To move into the futures segment, only a small subset of [retail investors] might consider it,” he adds.

The T-Bill problem

Can futures realistically compete with T-bills for investor attention? Amer argues the comparison misses the point. “Treasury bills and futures contracts serve fundamentally different investment objectives,” he tells us. “Investors evaluating futures are typically considering [prospects] for risk management, tactical positioning, or leveraged market exposure rather than comparing them directly with fixed-income returns.”

OUR TAKE- That’s only fair in a market where derivatives are already part of the toolkit. In Egypt, however, investors can still earn riskfree returns of nearly 25% on one-year government paper — the weighted average on the most recent 364-day EGP T-bill auction came in at 24.6%. Whether enough investors find the trade-off worthwhile is a question the clearing house was less keen to answer.

The smarter play

The EGX rolled out single-stock futures earlier this month, starting with contracts on CIB and TMG in a turnaround that may be intended to address the first product’s limitations. Rather than asking investors to take a view on a basket of thirty stocks, the exchange is now offering something they already understand: a leveraged position on two of the market’s most liquid names. CIB and TMG contracts will hit the EGX on Sunday, 21 June.

REFRESHER- The two names account for an outsized share of EGX liquidity. CIB was the single most-traded stock on the exchange in May at EGP 10.4 bn (6.6% of total listed stock turnover), with TMG close behind at EGP 9.7 bn (6.3%). Together, just two tickers out of 200-plus pulled nearly 13% of all listed stock trading value last month.

“When you place a derivative contract on stocks that people already like and see value in, it supports the chances of success,” Genena tells us. CIB and TMG together represent the highest freefloat adjusted market caps on the exchange. Their investor bases (local, regional, and international) are deep, and both stocks carry what Genena calls value. Investors who want to express a directional view on either name can now do it with 4x leverage instead of buying the physical shares, meaning a 1% move in the underlying stock translates into a 4% gain or loss on the futures position.

What’s next

The first real test comes later this month when the June contract expires. It’ll be the market’s first look at the full lifecycle of an EGX30 futures contract — from launch to final settlement — and the first chance to see how the clearing and settlement infrastructure holds up under live conditions. “It will serve as an important practical demonstration of the market infrastructure,” Amer says.

The story the market needs to tell by then is whether single-stock futures can find the audience that index-tracking instruments couldn’t. The conditions needed for broader EGX30 futures adoption (institutional participation, foreign investor appetite, and retail fluency) aren’t there yet. CIB and TMG contracts have better odds precisely because they sidestep those conditions and investors already have a view on them. If CIB and TMG contracts find an audience, and the June expiry goes off without a hitch, the case for the broader derivatives market gets easier to make. If it doesn’t, the market will have a harder sell on its hands.