Stock Exchange to Hold Trial Sessions on New Closing Price Indicator "MVWAP"

The Egyptian Stock Exchange (EGX) announced that trial sessions will be held on a new version of the trading system on Jan. 4-5, at its headquarters.

The stock exchange stated, in a statement on Tuesday, that the new system includes amendments to calculating the Moving Volume Weighted Average Price (MVWAP) indicator.

EGX indicated that in order to calculate the closing price during the trading session using MVWAP, it is required that the minimum value of executions be EGP 300,000 for the main index, and EGP 150,000 for the small and medium-sized enterprises index, or its equivalent in foreign currencies.

It continued, "The MVWAP closing price is the moving average of the values of the executed transactions weighted by quantities for the last operation/operations that fulfilled this condition in the session."

It added that in the event that the condition of the minimum value of executions is not met during the trading session, the reference price for the security is the intraday closing price.

The new version also include amendments to the daily closing price, as a condition was added in order for the price calculated during the closing auction session to be approved, and it is referred to as the condition (Y±), which is a specific percentage that the daily closing price does not exceed, and calculated from the last MVWAP closing price.

Condition value = (Total value traded during 3 months/ No. of trading days) * 0.5% or EGP 300,000 for main market & EGP 150,000 for SMEs or its equivalent in foreign currencies, whichever is higher.

The above condition is calculated once every three months, and if the actual value is less than the value of the condition or its minimum, a new closing price is not calculated, and if it is greater than or equal to the value of the condition or its minimum, a new closing price of the security is calculated on the basis of the MVWAP.

In case that the minimum required traded value is not met during the session, the previous close price to which the condition apply shall be adopted as the closing price of the security, (no change in price of security).

In the absence of a calculated price to which the condition apply, the closing price of yesterday will be adopted.

MVWAP is a trading tool that can be used by all traders to ensure they are getting the best price. However, these tools are used most frequently by short-term traders and in algorithm-based trading programs.

It is a user defined average of VWAP calculations and has no final value as it can run fluidly from one day to the next.

Attaining the MVWAP is quite simple after VWAP has been calculated. An MVWAP is basically an average of the VWAP values. VWAP is only calculated per day, but MVWAP can move from day to day because it is an average of an average. This provides longer-term traders with a moving average volume-weighted price.

Traders that buy below the VWAP get a better-than-average purchase price. On trending days, attempting to capture pullbacks toward the VWAP and MVWAP can produce a profitable result if the trend continues.