Egypt’s Financial Regulatory Authority to License Brokerage Firms as Market Makers, Liquidity Providers, and Authorized Participants
The Egyptian Financial Regulatory Authority (FRA) announced plans to introduce a comprehensive set of regulatory amendments designed to enhance the role of market makers and strengthen liquidity in the Egyptian capital market. The reforms are part of a broader effort to improve trading efficiency, stabilize prices, and attract both local and foreign investment.
According to the FRA, the proposed changes include the introduction of two new activities—Liquidity Provider and Authorized Participant—alongside the development of the existing Market Maker framework. Together, these measures aim to elevate the operational efficiency and competitiveness of the Egyptian Exchange (EGX).
Expanding Brokerage Licenses
Under the new regulations, brokerage firms will be allowed to obtain licenses to operate as Market Makers, Liquidity Providers, or Authorized Participants in addition to their core brokerage activities. Crucially, companies will no longer be required to establish a separate legal entity to engage in these functions.
Instead, firms can apply directly for additional licenses, provided they meet the financial and solvency requirements set by the FRA to ensure the strength and stability of their balance sheets.
Defining the New Roles
Market Maker:
A market maker is responsible for ensuring continuous liquidity for a listed security or financial instrument by posting simultaneous buy and sell orders during trading sessions. This mechanism helps maintain price stability and facilitates smoother market transactions.
Liquidity Provider:
A liquidity provider’s role is to improve market liquidity and stability for a listed security or financial instrument, typically under an agreement with the issuer. The provider submits buy and sell orders throughout trading sessions as per FRA regulations to maintain orderly market conditions.
Authorized Participant:
An authorized participant is an entity licensed to issue or redeem exchange-traded fund (ETF) units—including commodity and index funds—to ensure that their market prices closely track the net asset value (NAV) of the underlying fund. These participants operate under contracts with the investment fund, in accordance with FRA guidelines.
Strengthening Egypt’s Capital Market
The FRA emphasized that the new licensing framework represents a major step forward in aligning Egypt’s capital market practices with international standards. By enhancing market depth, transparency, and efficiency, the authority expects the reforms to boost investor confidence and increase foreign inflows to the Egyptian Exchange.
The initiative underscores Egypt’s ongoing efforts to modernize its financial ecosystem and position the country as a regional hub for investment and capital markets in the Middle East and Africa.