The Egyptian Capital Market Association (ECMA) has welcomed the introduction of a new method to calculate the closing price of stocks at the Egyptian Exchange, noting that the new system is applicable in more than 90% of the world’s stock exchanges. However, ECMA suggested starting the trading session at 9:00 to find room for applying the new method.
The new methodology for calculating the intraday closing price of shares is based on the 30-minute time-moving “Moving VWAP” weighted average. This is in lieu of the previous method of weighted average volumes over the duration of the daily trading session.
The new methodology includes the creation of an auction session to determine the closing price of the “pre-close auction” before the end of the trading session and within the last half an hour, provided that the stock exchange administration sets the date of the auction session during the next week.
ECMA pointed out that the decision leaves EGX with the best international practices related to the transparency of traded prices. This step has more importance for foreign investors and funds than for individual dealers.
ECMA believes that raising the price limits to 20% is a new correct decision because it is a material indication of lifting all restrictions on trading (precautionary measures) that were applied after the revolution.
Over time, the decision will create, in a smart, calm and institutional manner, a price equilibrium for all stocks, especially the limited free-trading stocks that get misused.
The association said that amending the method of calculating the variable closing price during the trading session on the basis of an average execution price weighted by the quantity for the last 30 minutes is more transparent and fair. Moreover, most international investors understand this method because it is the closest to the methods used in international stock exchanges.