FRA approves model short selling contracts
22 October 2026 Egypt
Image: Barca/stock.adobe.com
The Financial Regulatory Authority (FRA) has issued a decision approving model short selling contracts for brokerage firms and securities borrowers.
Enacted under the new regulatory framework introduced by FRA Board Decision No. 155 of 2026, the resolution establishes a clear contractual structure governing transactions that brokerages execute on behalf of short sellers, utilising the centralised lending platform at Misr for Central Clearing, Depository and Registry (MCDR).
The template defines the procedural roles, rights, and obligations of both firms and borrowers, while regulating fees, commissions, and the distribution of yields that invested cash collateral generates.
To control operational and market risk, the framework requires borrowers to post initial margin collateral that meets or exceeds minimum FRA thresholds before trade execution, while brokerage firms must isolate cash collateral into dedicated, segregated accounts restricted to short selling transactions.
To minimise counterparty risk, brokerages must mark borrowed securities to market using real-time intraday closing prices, monitoring the collateral-to-borrowed-securities ratio against regulatory and contractual minimums.
The contract sets clear protocols for defaults or delays in returning borrowed shares, requires the brokerage to execute mandatory buy-ins subject to standard settlement timeframes, and enforces mandatory position closures if a security loses eligibility or if corporate actions trigger regulatory thresholds.
Regarding financial terms and yield management, the regulations require brokers to invest cash collateral exclusively in FRA-approved instruments throughout the duration of the lending period, notify clients of active investment channels and yields, and credit returns directly to the client’s account.
The contract mandates that brokerage firms specify all expenses, commissions, and cash charges alongside their underlying calculation basis, while explicitly prohibiting subsequent fee modifications without the client’s explicit written consent.
Furthermore, the framework guarantees the client’s right to execute buy and sell orders, and to fully or partially close open positions during the borrowing term.
Dr Islam Azzam, chairman of the FRA, stated that the model contract represents a significant development toward fully enabling short selling across Egyptian capital markets.
The authority is currently finalising technical guidelines and practical manuals while fine-tuning the MCDR Central Securities Lending (CSL) system through live trials to ensure real-time operational integration, complete end-to-end transaction logging, and full market visibility.
Dr Azzam added that the standardised contract unifies market practices, establishes clear operational boundaries for collateral administration, enforces position monitoring, and outlines strict remedies for margin calls or delayed share returns to protect all market participants.
Enacted under the new regulatory framework introduced by FRA Board Decision No. 155 of 2026, the resolution establishes a clear contractual structure governing transactions that brokerages execute on behalf of short sellers, utilising the centralised lending platform at Misr for Central Clearing, Depository and Registry (MCDR).
The template defines the procedural roles, rights, and obligations of both firms and borrowers, while regulating fees, commissions, and the distribution of yields that invested cash collateral generates.
To control operational and market risk, the framework requires borrowers to post initial margin collateral that meets or exceeds minimum FRA thresholds before trade execution, while brokerage firms must isolate cash collateral into dedicated, segregated accounts restricted to short selling transactions.
To minimise counterparty risk, brokerages must mark borrowed securities to market using real-time intraday closing prices, monitoring the collateral-to-borrowed-securities ratio against regulatory and contractual minimums.
The contract sets clear protocols for defaults or delays in returning borrowed shares, requires the brokerage to execute mandatory buy-ins subject to standard settlement timeframes, and enforces mandatory position closures if a security loses eligibility or if corporate actions trigger regulatory thresholds.
Regarding financial terms and yield management, the regulations require brokers to invest cash collateral exclusively in FRA-approved instruments throughout the duration of the lending period, notify clients of active investment channels and yields, and credit returns directly to the client’s account.
The contract mandates that brokerage firms specify all expenses, commissions, and cash charges alongside their underlying calculation basis, while explicitly prohibiting subsequent fee modifications without the client’s explicit written consent.
Furthermore, the framework guarantees the client’s right to execute buy and sell orders, and to fully or partially close open positions during the borrowing term.
Dr Islam Azzam, chairman of the FRA, stated that the model contract represents a significant development toward fully enabling short selling across Egyptian capital markets.
The authority is currently finalising technical guidelines and practical manuals while fine-tuning the MCDR Central Securities Lending (CSL) system through live trials to ensure real-time operational integration, complete end-to-end transaction logging, and full market visibility.
Dr Azzam added that the standardised contract unifies market practices, establishes clear operational boundaries for collateral administration, enforces position monitoring, and outlines strict remedies for margin calls or delayed share returns to protect all market participants.
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