الهيئة العامة للرقابة المالية

FRA Issues Model Short Selling Contracts for Brokerage Firms and Securities Borrowers – Wednesday 21 October 2026

Dr. Islam Azzam, FRA Chairman:

• Standardizing contracts to boost market transparency and streamline client-broker relations.
• Setting clear rules for party obligations, collateral management and position closing.
• Engaging market stakeholders during live central lending system trials.

In a pivotal step toward the official launch of short selling in Egyptian capital markets, Dr. Islam Azzam, FRA Chairman has issued a decision approving model short selling contract for brokerage firms and securities borrowers. Enacted under the new regulatory framework established by FRA Board Decree No. 155 of 2026, the decision establishes a clear contractual framework governing the relationship between the securities borrower—seeking to borrow securities available on the central lending platform at Misr for Central Clearing, Depository and Registry (MCDR)—and the licensed brokerage firm executing transactions on the borrower’s behalf.).

Short selling mechanism operates on the presence of a lending client who wishes to lend owned shares and securities borrower who seeks to borrow shares to execute a short sale with the intent to repurchase and return them to the lender at a later date if the stock price is expected to decline. Profit is thereby realized from the price differential between the sale and purchase prices, based on the investor’s market expectations and price projections, pursuant to a binding agreement executed with a licensed brokerage firm.

This model contract was finalized following extensive consultations with market stakeholders to leverage industry expertise and address practical operational requirements. This collaborative approach reflects FRA’s commitment to constructive community dialogue, ensuring the development of enforceable rules that balance operational efficiency, risk management, and investor protection.

The template comprehensively defines the procedural roles, rights and obligations of both brokerage firms and securities borrowers. It regulates key operational aspects including fees, commissions, and the distribution of yields generated from invested cash collateral. These provisions enhance operational efficiency, promote market transparency, and ensure investors fully understand the mechanism, its associated risks, margin maintenance protocols, and position closure triggers under regulatory or contractual rules.

To mitigate operational and market risks, the contract establishes several mandatory safeguards. Borrowers must post initial margin collateral—at or above the minimum thresholds mandated by FRA regulations—as specified in the contract annex prior to execution, while brokerage firms are legally required to deposit cash collateral into dedicated, segregated accounts restricted to short-selling transactions.

Furthermore, to minimize counterparty risk and safeguard market integrity, brokerages must continuously mark borrowed securities to market using real-time intraday closing prices and monitor the collateral-to-borrowed-securities ratio against regulatory and contractual minimums.

The contract sets clear protocols for defaults or delays in returning borrowed shares, requiring the brokerage to execute mandatory buy-ins subject to standard settlement cycles. It also outlines mandatory position closure events, such as a security’s removal from the eligible trading list or regulatory triggers arising from corporate actions like M&As, tender offers, spin-offs, or liquidations.

In addition, brokerage firms are obligated to provide clients with a comprehensive guide detailing short selling concepts, operational mechanics, risks and benefits, updating this guide after any regulatory revisions and distributing it to clients at least annually.

Regarding financial terms and yield management, cash collateral must be invested exclusively in FRA-approved instruments throughout the lending period. Brokers must inform clients of investment channels and actual yields, crediting returns directly to the client’s account upon receipt or according to agreed terms.

Regarding borrowing costs, the model contract mandates that brokerage firms clarify all expenses, commissions and other cash charges debited from the client, clearly stating the calculation basis for each. Future modifications to fees and commissions are strictly prohibited without the client’s explicit written consent.

Furthermore, the model guarantees the client’s right to issue buy and sell orders for borrowed securities, as well as to fully or partially close their open positions during the borrowing term in accordance with contractual provisions.

Dr. Islam Azzam highlighted that the model contract is a key milestone toward fully enabling short selling across Egyptian capital markets. The Authority is currently finalizing technical guidelines and practical manuals for all market participants in tandem with fine-tuning the MCDR Central Securities Lending (CSL) system through live trials. This ensures real-time operational integration between MCDR and brokerage firms, complete end-to-end transaction logging, and full market visibility. Under this setup, borrowers can view all available lending offers to select options aligned with their investment goals, while lenders can monitor market-wide lending bids.

FRA Chairman added that the standard 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.

To ensure regulatory and legal compliance, borrowers must explicitly certify ultimate beneficial ownership of the account, declare legitimate sources of funds, and submit required Customer Due Diligence (CDD) data pursuant to Anti-Money Laundering (AML) Law No. 80 of 2002 and related non-banking financial regulatory decrees.

Furthermore, licensed brokerages are bound by strict confidentiality mandates prohibiting the disclosure of client data or transaction records to third parties without prior written consent, except when responding to regulatory reporting mandates from FRA or lawful judicial orders.

It is worth noting that in a short-selling transaction, the securities borrower profits if their expectations of a drop in the borrowed security’s price are realized. In this scenario, the borrower repurchases the shares at a lower market price to lock in a profit margin and returns them to the lender, with borrowing costs deducted from the realized profit. Conversely, if the security’s price rises and the borrower wishes to limit their losses, they must repurchase the shares at the higher market price, incurring a loss in addition to paying borrowing costs.

In both cases, the securities lender earns a yield for lending their securities—typically approximating the risk-free rate plus an additional lending premium—while continuing to retain all underlying economic benefits associated with stock ownership.

FRA Chairman Extends Condolences over Western Assiut Road Accident, Orders Fast-Track Compensation – Tuesday 20 October 2026

Dr. Islam Azzam, FRA Chairman has expressed his condolences to victims’ families of the tragic traffic accident that occurred today within Faiyum Governorate, involving a collision between a passenger bus and a heavy transport truck. The initial death toll stands at 13 fatalities, with over 34 others injured. Dr. Azzam prayed to Almighty God to bestow His infinite mercy upon the deceased, grant their families patience and solace and wish all the injured a swift and complete recovery.

In light of his follow-up on the aftermath of the accident, Dr.  Islam Azzam ordered the Egyptian Compulsory Insurance Pool (ECIP) to initiate all necessary procedures to pay out the due compensation to the victims’ families and the injured in accordance with the Unified Insurance Law No. 155 of 2024.

FRA Chairman further directed prompt communication with the families of the deceased and the injured to facilitate procedures and accelerate the disbursement of compensations. These amounts stand at EGP 100,000 per fatality. Meanwhile, injury payouts will be determined based on the disability percentage certified by the Medical Commission, in accordance with the Unified Insurance Law. Settlements will be fast-tracked for eligible beneficiaries upon the receipt of completed accident documentation and verification of the compulsory insurance policy’s validity.

For his part, the Executive Director of the Egyptian Compulsory Insurance Pool confirmed that Pool representatives will directly reach out to the victims’ families to finalize the required paperwork and expedite compensation payouts as quickly as possible.

FRA Licenses 7 Companies for Non-Banking Financial Activities – Tuesday 20 October 2026

• Number of registered debt collection firms rises to 12 in the non-banking finance sector

Financial Regulatory Authority (FRA), chaired by Dr. Islam Azzam, has granted approvals to seven companies and entities for incorporation, registration, and licensing across various segments of capital market and non-banking finance sector. Issued under FRA’s mandate to regulate and supervise non-banking financial markets, these decisions aim to expand market capacity, deepen liquidity and foster ecosystem growth.

As part of the capital market developments, Cheria Securities Promotion and Underwriting was approved for incorporation under Law No. 95 of 1992 to conduct promotion and underwriting services.

Regarding capital market licensing, the Authority approved granting e-finance Financial Services a license to engage in participating in the incorporation of companies issuing securities or in their capital increases. Additionally, Golden Way Securities Brokerage & Bonds was licensed to conduct bond trading, dealing and brokerage activities, added to the company’s licensed scope of business.

Furthermore, Olive Egypt Holding was granted a license to participate in incorporating securities-issuing companies or participating in their capital increases. Concurrently, Business Community received licensing to manage investment portfolios and investment funds, both added to its corporate scope of activities.

In the non-bank financing sector, FRA granted preliminary approval to Fawry Consumer Finance to add factoring to its corporate purpose. The company will complete the necessary procedures with the General Authority for Investment and Free Zones (GAFI) to amend Articles (2) and (3) of its Articles of Association. Then, it shall submit the required documentation to FRA for its final operating license, and update its corporate name in line with the added activity, in compliance with Law No. 159 of 1981 and its executive regulations.

Lastly, the Authority approved enrolling Sympl FinTech in  Debt Collection Registry. This brings the total number of firms registered in debt collection activity to 12 since the issuance of FRA Board Decision No. (278) of 2025.

These approvals fall within the constitutional and legal mandate of the FRA to regulate and supervise non-banking financial markets and instruments. This encompasses capital markets, futures exchanges, insurance activities, mortgage finance, leasing, factoring, securitization, consumer finance, and other activities, alongside its mandate to approve the establishment and licensing of companies operating in these markets.

Incorporation, licensing and activity-related approvals are issued based on recommendations from Incorporation and Licensing Committee. This committee is tasked with reviewing and issuing initial and final approvals for companies, requests to add activities and mechanisms, opening, closing, and relocating branches, reviewing amendments to statutes, adopting incentive systems and amendments, changing the legislative framework for companies operating in securities and consumer finance, and examining liquidation requests or voluntary temporary suspension of activity.