FRA approves short selling regulations for Egypt
11 March 2026 Egypt
Image: Givaga/stock.adobe.com
The Financial Regulatory Authority (FRA) for Egypt has issued a regulatory decision on securities lending for short selling.
The decision aims to enhance market efficiency and increase liquidity and depth, thereby supporting the stability of transactions and protecting the rights of investors.
According to the authority, the central lending system is characterised by transparency and real-time monitoring, and is carried out exclusively through the implementing body, which is the Central Depository and Registration Company (Misr Clearing).
This recent regulatory decision sets the priority criteria: loan requests are implemented based on the lowest offered loan rate, then the longest period, and finally the priority of entering requests into the system.
The FRA stipulates that a cash cover of 150 per cent of the value of the open position must be provided before implementation; this consists of 100 per cent of the value of the borrowed shares plus 50 per cent as a cash guarantee margin, with alternatives for additional guarantees available in accordance with the regulatory controls.
Under the new regulation, comprehensive requirements are set out to ensure brokerage firms' ability to manage business risks, including solvency and financial capacity; technical and operational efficiency; integrity and protection of customer funds.
To ensure market stability and prevent any practices that affect the fairness of trading, the decision set maximum limits for lending and concentration operations.
As stated by the authority, the percentage of securities available for lending should not exceed 25 per cent of the total free-float shares of the issuing company.
The decision stipulated a limit of five per cent of the free-floating shares of a single company for a single lender (and its related group), and approximately two per cent of the free-floating shares of a single company for a single borrower and its related group.
Under the new regulations, the FRA established a monitoring system to ensure the adequacy of guarantees throughout the loan period.
For instance, this includes re-evaluating borrowed securities and all collateral provided daily according to the closing prices announced by the stock exchange.
In addition, if the guarantee drops to 140 per cent, the client is obligated to raise it to 150 per cent within two working days, and if this is not done, the shares will be returned without further notice.
The decision guarantees the rights of the original owners of the securities (lenders) and to regulate safe exit routes from open positions, says the FRA.
It stipulated that the client (the lender) would retain all their financial rights related to share ownership throughout the loan period, including cash distributions and realised profits, free shares resulting from the capital increase, subscription rights, and all other in-kind and financial benefits.
The decision also regulated the mechanisms available for returning shares, either through the available balance with the borrowing customer, or through repurchase from the open market using the proceeds of the sale.
There are three cases that necessitate the immediate termination of the borrowing process to ensure the stability of legal positions.
These are: the security is removed from the list of securities that are allowed to be traded; cases of precautionary seizure, issuance of orders to prevent disposal, or death of the investor; mergers and acquisitions, purchase offers, splits, or liquidations.
The decision aims to enhance market efficiency and increase liquidity and depth, thereby supporting the stability of transactions and protecting the rights of investors.
According to the authority, the central lending system is characterised by transparency and real-time monitoring, and is carried out exclusively through the implementing body, which is the Central Depository and Registration Company (Misr Clearing).
This recent regulatory decision sets the priority criteria: loan requests are implemented based on the lowest offered loan rate, then the longest period, and finally the priority of entering requests into the system.
The FRA stipulates that a cash cover of 150 per cent of the value of the open position must be provided before implementation; this consists of 100 per cent of the value of the borrowed shares plus 50 per cent as a cash guarantee margin, with alternatives for additional guarantees available in accordance with the regulatory controls.
Under the new regulation, comprehensive requirements are set out to ensure brokerage firms' ability to manage business risks, including solvency and financial capacity; technical and operational efficiency; integrity and protection of customer funds.
To ensure market stability and prevent any practices that affect the fairness of trading, the decision set maximum limits for lending and concentration operations.
As stated by the authority, the percentage of securities available for lending should not exceed 25 per cent of the total free-float shares of the issuing company.
The decision stipulated a limit of five per cent of the free-floating shares of a single company for a single lender (and its related group), and approximately two per cent of the free-floating shares of a single company for a single borrower and its related group.
Under the new regulations, the FRA established a monitoring system to ensure the adequacy of guarantees throughout the loan period.
For instance, this includes re-evaluating borrowed securities and all collateral provided daily according to the closing prices announced by the stock exchange.
In addition, if the guarantee drops to 140 per cent, the client is obligated to raise it to 150 per cent within two working days, and if this is not done, the shares will be returned without further notice.
The decision guarantees the rights of the original owners of the securities (lenders) and to regulate safe exit routes from open positions, says the FRA.
It stipulated that the client (the lender) would retain all their financial rights related to share ownership throughout the loan period, including cash distributions and realised profits, free shares resulting from the capital increase, subscription rights, and all other in-kind and financial benefits.
The decision also regulated the mechanisms available for returning shares, either through the available balance with the borrowing customer, or through repurchase from the open market using the proceeds of the sale.
There are three cases that necessitate the immediate termination of the borrowing process to ensure the stability of legal positions.
These are: the security is removed from the list of securities that are allowed to be traded; cases of precautionary seizure, issuance of orders to prevent disposal, or death of the investor; mergers and acquisitions, purchase offers, splits, or liquidations.
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