الهيئة العامة للرقابة المالية

As part of ongoing preparations for the anticipated launch of the short-selling mechanism, Financial Regulatory Authority (FRA), chaired by Dr. Islam Azzam, held intensive consultative meetings with representatives of the Egyptian Exchange (EGX), Misr for Central Clearing, Depository and Registry (MCDR), securities brokerage firms and custodians. The sessions aimed to finalize the executive procedures for the mechanism in accordance with the new regulatory framework recently issued under FRA Board Decision No. 155 of 2026.

The meetings featured live technical trials on the centralized lending system to ensure real-time, seamless integration between MCDR and brokerage firms, while documenting all operational stages and procedures. The system enables borrowing clients (short sellers) to view all available lending offers from lending clients (lenders) and select those that best align with their investment objectives, while allowing lenders to view all other lending offers registered on the platform.

Participants reviewed operational infrastructure updates to guarantee smooth and efficient execution upon launch. Technical teams also assessed the technological readiness of brokerage firms required to conduct these operations, connectivity protocols with the centralized lending system and real-time client tracking capabilities.

The discussions further addressed ongoing steps to establish a comprehensive executive procedures manual. This guide will formalize the steps required from all market participants to ensure that brokerage firms and MCDR fulfill their legal and regulatory obligations within a clear framework that guarantees operational efficiency for borrowed securities.

Additionally, FRA and EGX are currently reviewing the eligibility criteria and conditions for stocks that will be available for lending, which will be announced upon the official launch of the mechanism.

Dr. Islam Azzam, FRA Chairman, stated that these meetings reflect the Authority’s steadfast commitment to fostering market dialogue with industry stakeholders, listening to their feedback and concerns, and remaining open to all constructive proposals to ensure an optimal rollout of short selling—ultimately boosting market liquidity, enhancing pricing efficiency and deepening the capital market.

He added that the live technical trials on the centralized lending system are progressing satisfactorily, confirming the system’s efficiency and the ability of the new regulatory framework to strike a balance between encouraging lending and borrowing—offering greater flexibility to all parties—and maintaining strict risk controls and market stability.

Under the short-selling mechanism, a “lending client” offers shares they own for lending, while a “borrowing client” borrows those shares to sell them and subsequently repurchase them at a later date to return to the lender, anticipating a price decline. The investor realizes a profit from the spread between the selling and buying prices based on market expectations, governed by an agreement with a brokerage firm licensed to conduct such transactions.

Notably, FRA—through its training arm, Financial Services Institute (FSI)—previously organized a specialized training program for brokerage firms, financial institutions and custodians covering the new short-selling framework. The program detailed the centralized lending system, operational rules and controls, the rights and obligations of brokerage firms and borrowing clients, MCDR’s role, lending and borrowing limits and ratios. In addition to custodian responsibilities, securities availability and collateral management, closing borrowing positions and returning securities, corporate actions, direct agreements between brokers and lenders/borrowers, technical and regulatory requirements, and the standardized model contract between brokerage firms and borrowing clients recently issued under FRA Chairman Decision No. 3350 of 2026.

This standardized model contract defines the rights, obligations and procedural roles of both the brokerage firm and the borrowing client, while regulating fees, commissions and returns on margin collateral investments and their distribution. This supports practical implementation, helps market participants understand the mechanism and its associated risks, facilitates margin collateral monitoring, and clarifies procedures for closing positions when contractually or regulatory triggered.

Previously, FRA broadcast a comprehensive lecture for investors and industry specialists across its official website, social media channels and YouTube. Delivered by Dr. Islam Azzam, the lecture covered the core components and benefits of short selling, the detailed obligations of all parties (lenders, borrowers, brokerage firms, MCDR, and custodians), and how the new centralized lending system documents all operational stages in real time.