Mohamed Omran, Chairman of the Financial Regulatory Authority (FRA) revealed that the Board of Directors approved factoring to finance margin purchases of securities, providing brokerage firms with financing.
In a statement issued on Tuesday, Omran explained that the FRA will allow factoring companies to provide financing to brokerage firms on marginal purchases of securities, in a manner that allows brokerage firms to access new sources of financing.
He added that this enables brokerage firms to expand the activity of marginal purchases, leading to further activation of trading operations in securities on the Egyptian Stock Exchange (EGX).
The head of the authority said that this step comes within the framework of achieving integration between non-banking financial activities, pointing out that the decision includes the obligations and conditions that must be met by the practitioner of factoring.
The brokerage companies that is the subject of the contract with the factoring company must be among the companies, which received an approval from the commission to engage in margin purchases.
Moreover, the securities subject to purchase must be among those specified from the stock exchange and allowed to carry out purchases on margin, according to standards and specialized activities, and must be both issued by the stock exchange and approved by the FRA.
Factoring will allow businesses to sells its accounts receivable to a third party at a discount. A business will sometimes factor its receivable assets to meet its present and immediate cash needs at a low price.
The volume of discounted securities amounted to more than EGP 11 billion at the end of 2020, compared to EGP 10.6 billion for the year 2019, with an increase of 6.6%.
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