Taking stock of 100 years
As the Cairo Stock Exchange celebrates its centenary, Sameh El-Torgman, the chairman of the Cairo and Alexandria Stock Exchange, writes about its past and the challenges it faces in a changing world
Exchanges worldwide are now competing in a revamped arena. The new era of globalisation, the application of highly sophisticated technology, cross- border trading, mergers and alliances require that for exchanges to survive and expand, their management must meet those challenges and restructure their entities into highly competitive businesses.
The Cairo and Alexandria Stock Exchanges (CASE) date back more than 100 years. The Alexandria Stock Exchange was established in 1883 followed by the Cairo Stock Exchange in 1903; the two were later merged. In 1928, the Cairo Bourse moved into its present premises on Al-Sherifein Street. The art nouveau building with its multiple neo-Doric colonnades was designed by French architect George Parcq, who was responsible for many of Cairo's elegant, early-20th century buildings such as Sednaoui's department store on Al- Khazindar Square.
For five decades, CASE was often listed as the fourth most important stock exchange in the world. However, the government of Gamal Abdel- Nasser closed the exchange in 1961 as part of its strategy of centralised planning, and it was not reopened until the Capital Market Law No. 95 of 1992. Five years later, a presidential decree was issued to fully re-organise CASE with an ambitious mission of modernisation.
As always, there are challenges in the field of transparency and efficiency -- we have to keep CASE constantly up to date with the latest advances, along with updating our rules and regulations to suit the continuous innovations in the capital markets. The past six years have seen steady progress in CASE's development along these lines.
Market surveillance and disclosure of information are our top priorities at CASE. Therefore, 1998 witnessed the establishment of a surveillance and disclosure department with a vision to protect investors, maintain an efficient and orderly market, promote fairness and transparency amongst market participants and provide useful and material information to all participants on a timely basis. In 2001 CASE witnessed the implementation of the new trading system and the establishment of the Egyptian Company for Information Dissemination.
In 2002, CASE introduced a new circuit-breaker system, and removed the five per cent ceiling on daily prices for the most active stocks. In the same year, CASE issued a new decree to reorganise its "over-the-counter" market, and in June 2002 the Capital Market Authority's Board of Directors approved the new listing rules which came into effect on 1 August of that year. The year 2003 witnessed a major milestone, as the US Securities and Exchange Commission selected CASE, based on strict criteria, to be a "Designated Offshore Securities Market". A new free market capitalisation index, the CASE 30 price index, was inaugurated, as was the International Securities Identification Number (ISIN code).
The Cairo and Alexandria Stock Exchange is inching closer towards an ambitious goal, that of becoming the leading stock market in the Middle East and Africa and expanding its role regionally and globally through technology links and cooperation agreements, thus increasing market liquidity and depth for its investors. In addition, CASE is striving to provide the fastest, cheapest and best execution of transactions.
These goals will be accomplished through pursuing the following objectives:
- Continuing to provide a well- regulated and transparent market, supporting a range of trading mechanisms on an efficient and flexible technology platform and providing reliable, real- time information services
- Attracting new local and overseas investors and issuers in order to deepen pools of liquidity
- Developing new products and services, such as the bond market, continuing the public awareness campaign and introducing new trading practices that coincide with the evolving needs of the investors
- Assisting in the establishment of a privately-owned service bureau which would provide operational and technical support to licensed brokers
- Working to achieve the clearest and most effective membership rules in the Middle East and Africa
- Continuing to improve corporate governance and disclosure practices of listed companies under the new listing standards administered by the exchange
- Increasing market professionalism and discipline of licensed brokers through new membership rules and establishing a membership committee to oversee the implementation and administration of the exchange's membership rules
- Establishing a listing committee of the exchange which oversees the exchanges implementation and administration of the new listing standards for the listed companies. Further investing in the development of the arbitration process to eventually become a self- regulatory organisation.
To enhance the accessibility of the Egyptian capital market, the exchange aims at extending its reach and size of business by building regional links, signing cooperation agreements and pursuing integration with other regional exchanges. Exchanges around the world have been actively participating, discussing alliances, mergers and joint ventures both domestically and internationally.
It is clear that Arab or Middle Eastern exchanges need to form an alliance in order to compete in today's market. It is good that several steps have already been undertaken towards the establishment of the "Arab Stock Market". However there are still some unresolved issues that need to be addressed prior to successful implementation.
Investors, Arab and foreign, are looking for a variety of products. Offering them a wide range of sectors in various markets will be suitable to their respective investment strategies. The Arab countries have a strong basis for integration, with a common language and historical background along with similar listing, surveillance and disclosure rules. Egypt, Saudi Arabia, the UAE and Bahrain even have the same trading system.
Our planning should be based on past experiences in the integration of other markets, and must incorporate a step- by-step approach. To develop the human resources crucial for the plan's success, we are promoting education and public awareness.
The exchange frequently organises education and training programmes for market participants, teachers, students, and assorted professionals on topics dealing with economics and related to the functions of a stock exchange and the capital markets. Our objective in this regard is to increase awareness among market participants, investors, journalists, students and other key groups.
It is also expected that over the medium term, the exchange's ongoing educational programs on investment in the capital market will create a new generation of young investors that will be interested and willing to invest in the capital market.
The year 2001 marked the culmination of several major public education and outreach initiatives that included the publication of brochures on the capital market, the Stock Riders online simulation game and the distribution of an educational video series.
We are looking forward to other tasks such as communications and public relations capacity building. The objective of this task is to create a well-trained communications staff within CASE capable of representing it as spokespersons and of effectively developing and implementing media and public outreach initiatives. Another task is training to increase the abilities of financial journalists, including their knowledge of financial markets, journalism techniques, and research tools.
