الهيئة العامة للرقابة المالية

FRA Chairman:

• Live operational tests with Misr Clearing (MCDR) and the Egyptian Exchange (EGX) continue constructive market dialogue on short selling.
• System designed to enhance transparency and enable real-time tracking for lenders and borrowers.
• The system ensures complete documentation across all operational stages and workflows, while providing clients full transparency to view all available offers.

Financial Regulatory Authority (FRA), in coordination with Misr for Central Clearing, Depository and Registry (MCDR) and the Egyptian Exchange (EGX), is conducting live technical trials on a new Central Lending System. These tests serve as a final operational phase preceding short selling rollout, specifically securities lending and borrowing for short sales, pursuant to the newly established regulatory framework issued under FRA Board Decision  No. 155 of 2026.

Technical teams across the three entities reviewed the latest infrastructure and electronic systems upgrades. These developments ensure real-time, end-to-end integration between MCDR and licensed brokerage firms, complete documentation of operational workflows, and transparent access for short sellers to evaluate lending offers submitted by lenders—matching them to their investment strategies—while enabling lenders to view competing lending offers recorded on the system.

Furthermore, several brokerage firms licensed for short selling participated in the latest technical trials to ensure operational efficiency, smooth mechanics ahead of launch, and verified IT infrastructure connectivity with the Central Lending System for real-time order tracking.

Dr. Islam Azzam, FRA Chairman stated that Central Lending System developed and managed by MCDR will host all securities balances available for lending. He highlighted that the system operates under updated rules that enforce total transparency, strict governance, and full protection of market participants’ rights, in alignment with international best practices and under direct FRA supervision.

Dr. Islam Azzam added that ongoing live trials reflect FRA’s commitment to constructive market dialogue, balancing regulatory oversight, international practices and solutions designed to overcome historical obstacles that previously delayed short selling activation in Egypt.

He emphasized that the live trials aim to bolster transparency and allow borrowers and lenders to monitor transactions in real time. The system ensures complete end-to-end documentation by explicitly displaying available securities by name, volume, and tenure, alongside detailed transaction logs, client profiles, and position closeouts to safeguard all parties.

The short-selling mechanism involves five primary market participants: lenders offering securities for loan; borrowers securing securities to short sell and return later; licensed brokerage firms acting as executing intermediaries; custodians handling client lending requests; and Misr for Central Clearing, Depository and Registry (MCDR).

The regulatory framework guarantees that lenders retain full economic ownership—including cash dividends, bonus issues, and pre-emptive rights—throughout the lending period. However, general assembly voting rights remain with the shareholder of record on the date of meeting.

Regarding limits and risk controls, total lent shares cannot exceed 40% of a listed company’s total free-float shares, while borrowing limits for an individual client and their related parties are capped at 2% of a listed company’s total free float. Additionally, a maximum cap of 5% is allocated for direct bilateral contracts executed between a broker, lender, and borrower, held under the brokerage firm’s responsibility.

To enforce compliance, MCDR is mandated to monitor lending limits continuously to prevent statutory cap breaches, perform daily mark-to-market valuations on borrowed securities and total collateral based on closing prices, and settle daily margin differentials directly through brokerage settlement accounts. Should a brokerage firm fail to return securities, MCDR will execute buy-in and return procedures on behalf of the lender.

Furthermore, MCDR must retain all short-sale proceeds, investing them on behalf of lenders from the settlement date into fixed-income instruments or FRA-approved investment vehicles. The central depository will then disburse the lending fee and accrued investment yield to the lender within two business days following central system closure.

Finally, brokerage firms and custodians must submit all requested data, records and documentation to FRA and EGX upon demand. To preserve market stability, FRA retains executive authority to take immediate protective measures against systemic harm, up to and including revoking a brokerage firm’s license to conduct short selling