The EGX will today trial a new system to calculate closing share prices that is hoped to improve accuracy, increase trading volumes and boost foreign investment in Egyptian shares.
he bourse is considering introducing an auction system to determine closing prices, a method used by some of the world’s biggest exchanges, and will today kick off a series of mock sessions between 3-4:30 pm CLT to test it out, the exchange said in a bulletin yesterday.
At least one representative from all licensed brokerage firms needs to be present at the trading floor during the trial sessions, which will also take place on Sunday and Monday.
As things stand, the EGX uses the volume weighted average price (VWAP), which uses all the trades that occur throughout a given session to determine a share’s closing price. This is in contrast to using the last traded price of the day for the closing price, a method which has declined in popularity since its heyday in the 1990s but is still used by several exchanges.
This could change if the proposal that’s currently being tested becomes a reality. Under the proposed system, closing prices will be based first and foremost on an auction that takes place before market close, Farid tells us. The results of the auction would then override the weighted average calculated from the latest session price.
