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What is the role of brokers in the Egyptian Stock Exchange?

In various financial markets, brokers play a vital role because investors cannot buy or sell securities except through a brokerage firm. Therefore, brokerage firms operating in the Egyptian market act as intermediaries for the sale or purchase of stocks, bonds, and investment documents (securities traded in the Egyptian market) based on the rules and regulations governing the operation of the Egyptian stock exchange.

Types of Brokers

There are main types of brokerage firms:

Executing Member Handling Margin Trading:

The executing member who executes and settles margin trading operations acts as the intermediary, and based on this provision, securities brokerage firms need to obtain the required licenses to engage in margin trading activities.

Executing Member Handling Settlement:

If the provision stipulates that securities brokerage firms need to obtain the required licenses to engage in margin trading activities, then firms that do not possess these licenses will not be eligible to engage in such activities.

Executing Member Handling Settlement through Another Party:

According to this provision, brokerage firms that settle transactions through another party are restricted.

Before choosing a broker for investment, you should:

Once you have determined your investment goals, your next step is to choose someone who can help you achieve those goals, whether it is managing your funds in the bank or being a financial advisor. You can also use investment funds or make direct transactions through brokerage firms, depending on the amount of your funds, your budget, and your needs.

The amounts you want to invest, but you should take into consideration that the fees for these advisory services may be separate from regular brokerage commissions and fees.

How to Choose a Broker

When you choose a broker to work with, the most important thing is to make sure that they are registered with the Egyptian Financial Supervisory Authority and the Egyptian Stock Exchange, as the authority keeps historical records of all brokerage firms and customer complaints.

Novice investors should avoid working with brokers who have a history of many complaints from their clients.

When you reach the stage of choosing an account manager, you should ask each of them for a brochure that explains the investment alternatives offered by their company. It should include the services provided by the company, the recommendations made in previous years, and the commission rates charged to customers. You can also negotiate the commission rate once you know the value of your transactions.

When you visit the company for the first time, you can talk to the responsible manager to tell him about your goals and investment projects so that he can guide you to the account manager who is suitable for you and has the experience you need to achieve your goals.

During the interview, you should ask the manager personal questions like those asked in job interviews, and don't believe any promises or vague statements. Discuss your financial capabilities, plans, and investment goals, and ask more questions to clearly understand how your funds will be invested.

Opening a New Account

When you choose an account manager, you must sign a contract and account opening form with the brokerage firm. This form contains important points about your account with the company, such as personal information like address, phone number, age, ID number, place of work, previous experience, owned assets, annual income, investment goals, and acceptable risk percentage.

The stock exchange states that the broker must always make the necessary efforts to deal with the investor, whether in opening a new account or in general account monitoring, and must operate on the principle of "know your client." This means that the broker should monitor any substantial changes in your financial position and investment goals and provide suitable recommendations accordingly. Additionally, your account file at the brokerage firm should contain all the orders you have placed and all the transactions that have been executed, as well as all correspondence between you and the broker for a period of five years prior.