Mohamed S. Abdel SalamChairman & Managing Director

MCDR OVERVIEW

Misr For Central Clearing, Depository & Registry Presentation

AMEDA conferenceAlex., April 27th -29th 2009

Contents• Introduction• Mission• MCDR Integrated Activities• Services initiated upon the international standards • MCDR Awards & International Recognition• Relations among Correspondent Business• MCDR Short term initiatives• Future Plans• Compliance to the International Recommendations• Useful Links

IntroductionMCDR – brief Overview MCDR (Misr For Central Clearing, Depository & Registry ) was

founded in 1994 Branches:6 branches in Cairo, Alex.&6th October MCDR members

Securities brokerage firms. Custodians Banks. Banks and financial institutions authorized to work as securities

intermediaries or as custodian or settlement members. MCDR Participants Securities issuers, Brokerage firms, Custodians, Direct Settlement,

Registered Owners, Primary Dealers Website: http://www.mcsd.com.eg

Introduction

Establishment• MCDR was established according to the

provisions of the Capital Market law #95 of 1992 and within the framework of the programs adopted by the Capital Market Authority (CMA) for developing the capital market mechanisms and applying the central depository system in accordance with the international standards in this field.

Introduction

MCDR Profile

• Legal Type 100% Egyptian Joint Stock• Date of Establishment August 1994• Date of Operation October 1996• Authorized Capital 250 million EGP• Issued Capital 140 million EGP• Paid Capital 140 million EGP• Governed by Depository & Registry Law

no 93 year 2000

MCDR Ownership

50% Banks

45% Brokers

5% EGX

shareholder %

Banks- Custodians(Member of central depository)

50%

Brokerage firms(Member of central depository)

45%

Egyptian Exchange 5%

Shareholders structure

Introduction

MCDR Participants

Type NumberIssuers 1260

Brokers 157

Custodians 41

Direct Settlement 32

Registered Owners 7

Primary Dealers 14

Introduction

MissionIn the past:MCDR focused mainly on:

Executing clearing and settlement of the daily stocks transactions in the Egyptian Capital market.

Finalizing central registry system for securities.

Providing investors with all information and data related to their accounts.

Managing the default risk through the settlement guarantee fund (SGF).

Guaranteeing the execution of financial or securities obligations.

Achieving stability and discipline in the market.

Mission

Reducing risks associated with delivering securities versus the value of the transaction.

Attracting foreign investor through applying the international standards (DVP).

Protecting securities investors against non-commercial risks.

Providing an auto match system matches online the trading system in the stock exchange with the clearing system in MCDR, Custodians and Brokerage firms.

MissionRecently:MCDR has conducted several initiative improvements to meet all market

participants’ interests: Well designed, clear, comprehensible and transparent legal infrastructure

Participating in IT company aims to provide Brokerage, Custodian firms with application systems in front and back office which are necessary to e-trade systems.

Managing the accounts of both cash and securities with the international institution for central depository (Clear Stream)

Establishing the automated system of the “Intra Day Trade” for active securities.

Protection of investor assets

Mission Corporate governance structure providing balance between the interests

of public and shareholders

Properly managed operational risk, business contingency and disaster recovery plans

Securities Lending/Borrowing practices

Efficient Cross-border settlement practices

Establishing the automated system of “Margin Trade” System and real

time Gross settlement “RTGS”. Providing accurate and timely information to the institutions rating Central

Settlement and Custody institutions as well as market participants and auditors

Mission

Providing Digital signature services to benefit a wide sector of the electronic media users

Subscripting in the SWIFT as a service bureau to provide the company members and Middle East with the SWIFT service.

Enforcing the international relation with the external institutions “AMEDA”, “IOSCO”, “FEAS”, “CSDs and others.

Central Counterparty practices

CentralDepository Central

Registry(Beneficiary Owner)

Participants

RTGS STP OTHERSettlement

EquitiesClearing

(traded Equities)

Fixed IncomesClearing

(Corporate &Governmental

Bonds)

Exchanged Trading Data with EGX

Clearing & Settlement systems

Issuers

MCDR Integrated ActivitiesMCDR Integrated Activities

BrokersCustodians Direct Settlement

Registered Owner

Primary Dealers

DVP

Shareholder list

Cash dividends

Stock dividends

Bond redemption

Other corporate action

Settlement Guarantee

fund (SGF)

Central Depository

Central depository activities

all activities related to the depository of securities, clearing, settlement of financial position resulting from securities transactions, and the transfer of securities ownership through book entry, including:

 

1. The deposit of securities with the company or with any licensed entity.

2. The transfer of ownership by book-entry of securities traded among Central

Depository Members.

3. The pledge of securities recorded by book - entry and financial position

4. The clearance and settlement of resulting from securities transaction 

Number of settled transactions executed on deposited and undeposited securities

Clearing and settlement system

• ClearingThe daily executed transactions ( buy and sell orders), are processed

through MCDR system in preparation for the transfer of ownership of the product and the fulfillment of all obligations.

Executing the clearing and settlement transaction at the exact periods (T+2) , (T+1) or (T+0) upon its nature.

• SettlementAt due date when the obligation is settled, then the ownership of the

product is transferred. This process involves Matching the buy and sell instructions Renewing the product's ownership, Transferring the related cash.

Transactions involving securities are usually settled on a delivery-versus-payment (DVP) basis..

Broker 2

Clearing & Settlement cycle

Broker 1Sell

order

Buy order

SWIFT/Net Settlement

Inject net

settlement

amount

Dr. Securities acc.

MCDRprocess

CustodianBlock for

sale Check balance

EGX Executed trades

Cr. Securities acc.Clearing between brokers

Settlement BanksBuyer acc.

Dr. cashBal.

Seller acc.

Cr. cashBal.

Clearing between

Sett. Banks

Net settlementSWIFT notification

CBEDr. Settlement

Bank 1

Cr. Settlement Bank 2

Registry owners log

Clearing & Settlement

Process

12 3

4

14

5

7

6 7

7

7

Central RegistryCentral registry Activities

All activities related to the bookkeeping of securities ownership, and of

pledge of securities, including:

1. The maintenance of records with the names of owners of securities, the

rights thereto, and the disposal thereof.

2. The distribution of entitlements of securities deposited with the

company, including the principal amount, the proceeds, dividends,

redemption value, and restructuring payments.

3. The publishing of any information and reports disclosed by issuers of

securities, be it general or related to their securities.

4. The offering of services related to the issuance of securities on behalf of

the issuer; and

5.    The exchange of securities upon the restructuring of the issuing entity.

Development of the registered issuer number

Settlement Guarantee Fund• The Settlement Guarantee Fund is committed to settle transactions

executed at the stock exchange in case of delay or default of settlement by any of the trading parties.

• SGF cover, cash default through financing the financial position& Securities default through stock lending and borrowing

• SGF positive role can be observed through the increase of the securities turn over rate as a result of the settlement of the member obligation defaults

SGF aims to facilitate.

– Guaranteeing the execution of financial or securities obligations.

– Achieving stability and discipline in the market.

– The fund is committed to settle transactions executed in the stock

exchange in case delay or default of settlement by any trading party.

– Attract local and foreign investments.

SGF positive role in market

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%21.96%

0.05%

default settlement

default cash

default securities

Through 47 bank branch

1. Dividends distribution service

MCDR Providing the distribution services for the dividends due on the deposited securities on behalf of the issuing companies (i.e. shares Dividends –Bond interest and redemption - …) , MCDR developed the distribution channels to satisfy the various customers needs

Dividends Channel

Home delivery SWIFT ChequesBank transfers Cash dividends

Services initiated upon the international standards

Services initiated upon the international standards 2. Introducing SWIFT service• MCDR was authorized to set the SWIFT message

standers of the NSMPG (National securities Market Practice Group) in Egypt.

• MCDR subscribed in SWIFT as a service bureau for company members allowing them to benefit from all system’s advantages with lower cost.

• The system aims to introduce the latest scientific means in the field of connection and exchange of massages and information among markets through authorized banks in different countries.

Corporate Insurance companiesBanks

Broker-Dealers

InvestmentManagers

Stock Exchanges

DepositoriesTrustees

Clearing systems

PaymentSystems

SettlementSystems

Government Institutions

SWIFT SWIFT Service Service Bureau Bureau (58 (58 Brokers)Brokers)

SWIFT Service BureauSWIFT Service Bureau

Services initiated upon the international standards

3. Introducing Short Selling service A New Leveraged Vehicle for Securities Trading being

Introduced in Egypt Managed by MCDR The system allows investors who own securities and

wish to keep them in order to gain a return through lending these securities to other investors, this leads to:

Increase the market liquidity; Benefit for all related parties; Increase the activity in the stock exchange as a whole.

The following chart reveal the process of short selling

Services initiated upon the international standards

Short Selling Process

Interest Income

Sell Order

Cash Collateral

Waiting Queue

Lending Pool

EGX TradingSystem

MCDRSettlement

System

BorrowingBroker

ShortSelling

Customer

Margin Calls

Initial Margin

Short Sell

Order

Cash

Lendingcustomer

LendingCustodian

Interest Income

Lending Request

MCDR SLB System

Services initiated upon the international standards

4. Certificate AuthorityThe Certification Authority (CA) is the entity authorized by the

Policy Management Authority to create, sign and issue Digital Certificates which built in accordance with the newest & the most secured international technology “ISO 27001” standards and it will provide a key role in the Capital Markets:– Protecting clearing and settlement system from fraud– Providing extra security for E-Trade instructions– Providing strong audit ability and legal enforceability of all

transactions– Enabling online services for issuers and their investors

• E-Trade Solution• E-Voting for company resolutions

– Strong authentication of stock market participants

Services initiated upon the international standards

28

Signing using PKIWritten signature

Digital signature Internet / intranet

•Unsecured documents` delivery • Late in documents` delivery•Availability of changing the contents

•No verification of the signature validity•No verification of the document contents validity•No verification of time stamping•No verification of who exactly signed

Using smart card and personal pin code

•Signing any document before sending•Signing data with Time stamping

Availability of storing signature & signed data

•verification of the signature validity•verification of the document`s contents validity•verification of time stamping•verification of who exactly signed

Services initiated upon the international standards

5. Other servicesMCDR initiate several services to meet the various

market participant (Issuers ,Investors, ….)needs: Shareholders list Pledge Repatriation Call center Internet Email & post mail SMS & Fax E vote

Services initiated upon the international standards

JP Morgan assessmentMCDR was granted the highest level of efficiency with a score of 1.25 points on a scale of 1 to 3

MCDR built the Information Security System in accordance with the ISO 27001 standards

B.I.D. quality award in the Diamond categoryFor significant contribution to the business world, for high standing and professionalism demonstrated by prestigious performance

Thomas Murray Risks AssessmentMCDR was granted an overall AA in Thomas Murray depository risks assessment that overall, Rating for Misr for Central Clearing, Depository and Registry (MCDR) is: A = Low riskMCDR overall rating

MCDR AWARDS & International Recognition

Overall, the Thomas Murray CSD Rating for Misr Company for

Central Clearing, Depository and Registry (MCDR) is:

A = Low risk

The outlook for the rating is: Stable

CSD Rating

Asset Comm

itment Risk

Liquidity Risk

Counterparty Risk

Financial Risk

Operational Risk

Asset Servicing Risk

Overall Rating

MCDR Rating: A A A A A+ A A

This Rating is for MCDR settlement, safekeeping and asset servicing operations

TM Risk Assessment to MCDR

Relations among Correspondent Business

● Africa & Middle East Depositories Association (AMEDA)

● Japan Securities Depository Center, Inc. (JASDEC)

● Thomas Murray

● International Organization of Securities Commissions (IOSCO)

● World Federation of Euro-Asian Stock Exchanges (FEAS)

● Union of Arab Stock Exchanges

● Central Securities Depositories (CSDs)

● Association of Global Custodian

● Association of National Numbering Agencies (ANNA)

MCDR Short term plans Establishing the settlement system of the exchange

traded funds (ETF) and the system of its related transactions:– Issuance of ETFs certificates.– safekeeping of the portfolio assets of the ETFs to be established.– Creation and redemption transactions of ETFs

Initiating an integrated system for clearing and settlement of the NILEX transactions (the Egyptian Exchange' market for growing medium and small companies) to provide an appropriate, secure, flexible movements for both companies & investors, together with an efficient and admission process.

Establishing an Effective risk management and corporate governance structures

Future plans Implementing the clearing and settlement system of

the derivatives market Futures Options

Developing the fixed income marketSettlement of Repo agreements. Bonds short selling

Meeting the necessary requirements for obtaining a credit rate of (AAA) from the international rating agency “Thomas Murray”.

Cross-border movement of capital and funds Increased cross-border securities trading Integration among stock exchanges and clearing

institutions Full automation and STP CCP and CMU Mechanism

Compliance to the International Recommendations

Compliance with G30 recommendations Compliance with SEC17F7 requirements. ISO 27001 standards Full automation in communication and data gathering Message standards and communication protocols Securities Lending/Borrowing practice Risk management and control processes Synchronized transfer of cash and securities Efficient business contingency and Disaster Recovery Planning Fair and easy access to the system Impartial, open and efficient corporate governance

Useful Links Misr for Clearing, Central Depository and Registry (MCDR)

www.mcsd.com.eg Capital Market Authority (CMA)

www.cma.gov.eg Egyptian Stock Exchange (EGX)

www.egyptse.com Egyptian Capital Market Association (ECMA)

www.ecma.org.eg Ministry of investment

www.investment.gov.eg Central Bank of Egypt

www.cbe.org.eg

Thank you