Egypt's Financial Regulatory Authority has approved a comprehensive framework for short selling on the Egyptian Exchange, introducing new risk controls and operational requirements as part of broader capital market reforms.
Egypt's Financial Regulatory Authority (FRA) has formally issued a regulatory framework enabling short selling on the Egyptian Exchange (EGX) for the first time. The move is intended to modernise Egypt's capital markets and follows the recent introduction of financial derivatives and hedge fund regulations.
Resolution No. 155 of 2026, signed by FRA Chairman Dr. Islam Azzam, was developed after consultations with the EGX, Misr for Central Clearing, Depository and Registry (MCDR), and brokerage firms. The framework aims to align with international standards while addressing previous obstacles to short selling in Egypt.
Key features of the new short selling regime
The framework establishes a Central Lending System managed by MCDR, which will record available securities, lending durations, and rates. This system is designed to provide transparency for both lenders and borrowers, helping them align their investment strategies.
To limit market risk, the rules cap total lending at 40% of a listed company's free-float shares, with individual borrowers and related parties restricted to 2%. Direct contracts between brokers, lenders, and borrowers are limited to 5% of free float. Borrowers must sell borrowed securities at or above the last traded price if the previous price movement was upward, and are required to deposit a minimum 50% cash margin. Intraday re-evaluation of collateral is mandated, with margin calls triggered if collateral falls to 140% of the borrowed value, requiring restoration to 150% within two working days.
Brokerage firms must maintain a minimum net equity of EGP 5 million, rising to EGP 10 million for those also conducting margin trading, and sustain an average liquid net capital ratio of at least 15% over the prior six months.
Operational safeguards and market impact
Under the new rules, MCDR will hold the proceeds from short sales and invest them in fixed-income instruments for the benefit of lenders, with daily settlements reflecting price changes. If a broker fails to return borrowed shares on time, MCDR will intervene to close the position directly.
Lenders retain all rights to dividends, subscription rights, and voting during the lending period. The FRA retains authority to exclude securities, adjust margin requirements, suspend participants, or revoke short selling licences to ensure market stability. Licensed brokers have one month to implement the necessary technological systems.
The activation of short selling is expected to deepen Egypt's capital markets, offering new tools for investors and aligning the EGX with global practices. The resolution will take effect the day after its publication in the official gazette.
