CAIRO: The Capital Market Authority has licensed another four brokerage firms to provide online trading services in the Cairo and Alexandria Stock Exchanges (CASE), according to CMA head Hany Sarie El Din. In special remarks to NOOZZ, Sarie El Din said the companies include Delta, CIBC, EFG-Hermes and Nile One Brokers. Earlier in July, the CMA licensed Arabia Online Company as the first brokerage firm to provide online trading services to investors in CASE. Existing brokers have until March 2007 to upgrade their systems and implement electronic trading. The market regulator is encouraging the introduction of online trading services at local brokerage firms, in hopes that this will avoid many disputes over investors' orders, especially as the initiative proved successful in Gulf countries and the United Arab Emirates. Electronic trading will improve performance, the CMA hopes, of approximately 130 brokerage firms which are CASE members. From the customer s perspective, online trading simply connects clients to their brokers through the latter s Web sites, enabling individuals to trade stocks without a human intermediary. The biggest challenge is the clients themselves, to accept the idea of buying and selling online [and] to be trained well so that they don t make mistakes. A mistake in one zero can make the difference between LE 1,000 and LE 10,000 says MCDR Managing Director Tariq Abdel-Bary in an earlier interview with The Daily Star Egypt. Ahmed Tawfik, managing director of Hermes Securities Brokerage, agrees that the reluctance of investors to use a new technology is the biggest obstacle to adoption of online services. Most Egyptians are not familiar with online [trading] and are afraid of it. It will require a shift in mentality, says Tawfik. Tawfik nevertheless believes that the ease of use of online trading will encourage its adoption, and that the service will be accepted by both existing and new clients. Some of our small clients who know the stock market well will use online trading [and] some big clients don t like to speak to anybody when making a trade. It will also attract new clients, says Tawfik. The challenge, from a broker s perspective, is to have the appropriate IT infrastructure to support online trading. Technically, many things were required, such as disaster recovery [and] backups, says Abdel-Bary. There is a long list of requirements by the CMA to secure the data and the communication channel [of brokers]. Brokerage firms also need to have a fully electronic back office that can integrate with the stock exchange and MCDR. Some of the other larger brokerage companies have upgraded their IT systems in preparation for electronic trading, and MCDR will work with the European software company Atos Euronext to provide an electronic back office and online trading system to other brokers. Marketing and awareness will be crucial for the proliferation of electronic trading amongst investors. With the removal of a human intermediary, improving investor understanding of market fundamentals is also necessary in order to avoid the volatility that was fueled by the entry of small retail investors into the market over the past year. While acknowledging the importance of informing clients, Tawfik believes that retail investors have a more sophisticated conception of stocks after this year s many corrections. I think that people are beginning to understand the risks of the stock market, says Tawfik. Agencies
