MCDR OVERVIEW
Misr For Central Clearing, Depository &
Registry Presentation
AMEDA conference
Alex., April 27th -29th 2009
Mohamed S. Abdel Salam
Chairman & Managing Director
Contents
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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
Introduction
MCDR – 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
Introduction
MCDR Ownership
Shareholders structure
5% EGX
shareholder
%
Banks- Custodians
50%
(Member of central depository)
Brokerage firms
50%
Banks
45%
(Member of central depository)
Egyptian Exchange
5%
45%
Brokers
Introduction
MCDR Participants
Type
Number
Issuers
1260
Brokers
157
Custodians
41
Direct Settlement
32
Registered Owners
7
Primary Dealers
14
Mission
In 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.
Mission
Recently:
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
MCDR Integrated Activities
RTGS
DVP
STP
OTHER
Settlement
Settlement
Guarantee
fund (SGF)
Clearing & Settlement systems
Central
Depository
Equities
Clearing
Fixed Incomes
Clearing
(traded Equities)
(Corporate &
Governmental
Bonds)
Shareholder
list
Cash
dividends
Central
Registry
Stock
dividends
(Beneficiary Owner)
Bond
redemption
Exchanged Trading Data with
EGX
Other corporate
action
Participants
Issuers Custodians Brokers
Direct
Registered
Settlement
Owner
Primary
Dealers
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
• Clearing
The 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.
• Settlement
At 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-versuspayment (DVP) basis..
Clearing & Settlement cycle
Dr. Securities acc.
Sell
order
Block for
sale
Broker 1
7
Registry
owners log
Check
balance
Custodian
2
3
1
Cr. Securities acc.
Clearing
between
brokers
7
4
Buy
order
Broker 2
4
1
EGX
Executed
trades
Settlement Banks
6
Buyer acc.
Dr. cash
Bal.
Seller acc.
Cr. cash
Bal.
7
5
SWIFT/Net
Settlement
Clearing &
Settlement
Process
Clearing
between
Sett. Banks
Net settlement
SWIFT notification
7
CBE
Dr. Settlement
Bank 1
Cr. Settlement
Bank 2
MCDR
process
Central Registry
Central 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
25.00%
21.96%
20.00%
15.00%
default settlement
default cash
10.00%
default securities
5.00%
0.00%
0.05%
Services initiated upon the international standards
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
Bank transfers
Cheques
Cash dividends
Through 47
bank branch
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.
Services initiated upon the international standards
SWIFT Service Bureau
Banks
Corporate
Insurance companies
Government
Institutions
Broker-Dealers
Investment
Managers
Stock Exchanges
SWIFT
Service
Bureau
(58
Brokers)
Depositories
Trustees
Settlement
Systems
Clearing systems
Payment
Systems
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
MCDR SLB
System
Lending Pool
Lending
Request
Lending
customer
Lending
Custodian
Interest
Income
EGX
Trading
System
Sell
Order
Borrowing
Broker
Waiting Queue
Interest
Income Cash Collateral
Short Sell
Order
MCDR
Settlement
System
Cash
Initial
Margin
Margin
Calls
Short
Selling
Customer
Services initiated upon the international standards
4. Certificate Authority
The 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
Written signature
Signing using PKI
•No verification of the signature validity
•Unsecured documents` delivery
• Late in documents` delivery
•Availability of changing the contents
•No verification of the document contents validity
•No verification of time stamping
•No verification of who exactly signed
Digital signature
Internet /
intranet
Using smart card and personal
pin code
28
•Signing any document before sending
•Signing data with Time stamping
•verification of the signature validity
•verification of the document`s contents
validity
•verification of time stamping
•verification of who exactly signed
Availability of storing signature & signed data
Services initiated upon the international standards
5. Other services
MCDR 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
MCDR AWARDS & International Recognition
JP Morgan assessment
MCDR 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 category
For significant contribution to the business world, for high standing and
professionalism demonstrated by prestigious performance
Thomas Murray Risks Assessment
MCDR was granted an overall A in Thomas Murray depository risks
assessment that overall, Rating for Misr for Central Clearing, Depository
and Registry (MCDR) is: A = Low risk
MCDR overall rating
TM Risk Assessment to MCDR
Overall, the Thomas Murray CSD Rating for Misr Company for
Central Clearing, Depository and Registry (MCDR) is:
A = Low risk
This Rating is for MCDR settlement, safekeeping and asset
servicing operations
Asset Commitment Risk
Liquidity Risk
Counterparty Risk
Financial Risk
Operational Risk
Asset Servicing Risk
MCDR Rating:
Overall Rating
CSD
Rating
A
A
A
A
A+
A
A
The outlook for the rating is: Stable
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 market
Settlement 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