| |
Central Depository System
• Definition
• Central Depository members
• Objectives of applying Central Depository System
• Registration procedures in the Central Depository
• Deposit of securities
• Functions of Custodians
• Procedures of securities deposit
• Transfers required to complete the selling transaction
• Transfers required to complete the buying transaction
• Portfolio transfer to another custodian
• Security freeze
Definition
Central Depository activity refers to any activity related to the depository of securities, clearing and settlement of financial positions resulting from trading transactions and the relevant pledge of securities
Central Depository members
• Banks and branches of banks registered at the Central Bank of Egypt
• Companies involved in the securities business according to the activities specified by the Board of Directors of the Capital Market Authority
• Companies and foreign entities working in the field of central depository, provided that its head office is regulated pursuant to rules specified by the Board of Directors of the Capital Market Authority.
• Any other entity accepted as a member by the Board of Directors of the company pursuant to the provisions and conditions specified by the executive regulation for law no.93 of year 2000
Objectives of applying Central Depository System
• Eliminate risks resulting from trading of material securities in the Capital Market. i.e. damage or loss or forgery.
• Get hold of all material securities at the central level through gradual withdrawal of securities traded in the markers and relieve issuers from printing securities certificates in the other hand.
• Simplify the process of trading in stock exchange as a result of dealing on balances and book entries instead of material securities.
• Increase the securities turnover due to completion of ownership transfer within a specified timeframe.
• Increase the market liquidity.
• Operating Settlement system according to Delivery Versus Payment (DVP) system.
• Relieve the issuers from cost, effort, time they take to print certificates for the original capital or any amendment thereon and print one certificate with total issuing value.
• Establish a database for all the securities issued and traded in the Egyptian Capital Market.
• Establish a database for securities owners and their relevant data.
• Foster investor’s confidence through adhering to international standards.
Registration procedures in the Central Depository
• The central depository process starts with registering the security in the Central Depository System (CDS) by the issuer.
• The issuer fills the MCSD listing memorandum and includes therein all data and documents required for registration at the CDS.
• The issuer submits to the MCSD all the documents and data indicating its legal status.
• The listing applications are presented to MCSD securities listing committee on a weekly basis.
• The date of starting trading on securities through the central depository shall be as approved by the committee.
• The issuer receives a letter of approving listing at the CDS within 15 days as a maximum from the date of submitting all the required documents.
• The issuer shall announce the starting date of trading through CDS in one of the widely circulated daily newspapers, one of which, at least, should be an English newspaper. The publishing shall come into force, at least, 10 days before the trading date
• Securities deposits made by issuers shall be accepted in the prescribed date or the required transfers should be fully made in case there are no printed or interim certificates.
In case that no securities certificates or interim certificates are printed by the issuer, one certificate including the total quantity of issued securities shall be submitted. A list of the shareholder’s names, quantity of shares, the respective unified code and the relevant custodian shall be attached thereto.
(The functions of the custodian’s shall be discussed in details).
MCSD shall open an issuing account according to the certificate submitted by the issuer and transfer the relevant quantity to the clients’ account according to the incoming data. Each custodian shall print out the account statement to his clients.
In case of having printed certificates of securities, issuers shall submit some samples of such certificates to MCSD along with other documents where the depository process is done based on such documents. The depository process is as follows:
Deposit of securities
The deposit process of securities is done through a custodian
Definition of a custodian: It is a bank or any entity (that deals in margin trading system) licensed by the Capital Market Authority and passed the MCSD training course on opening and managing current accounts of securities.
Functions of Custodians
1- Sign an agreement with the client.
2- Open a securities current account and manage such account for the client.
3- Deposit of securities at Central Depository System.
4- Implement the required transfers to perform the selling transaction at the client’s instructions.
5- Implement the required transfers to perform the buying transaction at the client’s request.
6- Portfolio transfers to any other custodian that the client wants to deal with.
7- Freeze the respective securities for a certain client.
8- Pledging of securities.
9- Take all the necessary means to safeguard the balances of clients dealing in securities.
First: Contract procedures
The Custodian shall sign an agreement with the client showing the rights and obligations of each party.
Second: Procedures of securities deposit
• The client goes to one of the custodians to deposit his securities
• The custodian records the securities on the securities deposit program
• The custodian delivers the securities to MCSD after recording.
• MCSD receives the securities, examines and reviews them according to the incoming samples from the issuers.
• After ensuring the soundness of the received securities, they will be credited to the custodian’s balances that effected the depository transaction and a relevant account statement is printed.
• The custodian prints out the account statement indicating the completion of depository transaction at MCSD and credits the securities to the client’s balance.
Third: Transfers required to complete the selling transaction according to the client’s instructions
• In case that the client wants to sell his securities, he can give the order to the broker to execute the selling transaction indicating the custodian who manages his account.
• The broker blocks the quantity that the client wants to sell at the respective custodian through the automated link between the broker and the custodian.
• The custodian blocks the quantity for the selling broker.
• After the completion of transaction on stock exchange, the custodian transfers the quantity to the broker for settlement.
• MCSD credits the selling revenue to the broker’s account at the clearing bank at the specified settlement date (in the morning).
Fourth: Transfers required to complete the buying transaction according to the client’s instructions
• In case that the client wants to buy securities registered in the central depository, he can issue a buying order to the broker indicating the custodian that manages his account
• The custodian records the buying order on his respective custodian program
• The broker executes the transaction on stock exchange.
• After the execution, the transaction appears at the custodian who matches the executed quantity on the stock exchange with the previously recorded buying order.
• The broker shall feed his cash balance at the clearing bank till the end of the day preceding the settlement day (SD-1) in preparation for the completion of settlement process.
Remark: After the completion of any transaction, the custodian prints out an account statement for each client having a transaction made on his account.
Fifth: portfolio transfer to another custodian
In case that the client wishes to change the custodian that manages his account:
• The client signs a contract with a new custodian.
• The client submits the portfolio transfer form to the old custodian.
• The custodian transfers the required quantity to the new custodian.
• The new custodian accepts the transfer and sends it to MCSD.
Sixth: Security Freeze
Security freeze will be effected according to:
First: upon the client’s request to attend the general assemblies. In this case, a security freeze shall will effected on whole quantity until the general assembly is held.
Second, if any official entity wants to freeze a client’s security, this entity will notify MCSD of its desire to freeze the balance mentioning the security name, the custodian name, and the quantity to be subject to freeze. Then, MCSD will directly effect the security freeze and notifies the custodian. The official entity wishing to do security freeze may communicate directly with the custodian.
|
|
|
|
|
| |
|
|
|