• Home
• News

Tripartite Partnership to Develop Electronic Infrastructure

The Financial Regulatory Authority (FRA), in cooperation with the Egyptian Exchange (EGX) and Misr for Central Clearing, Depository and Registry (MCDR), is conducting technical and live tests on the central securities lending system. This step serves as a prelude to the anticipated official launch of Short Selling operations, in line with the new regulatory framework issued under FRA Board Resolution No. (155) of 2026.

The live testing focuses on verifying the operational infrastructure efficiency and real-time electronic connectivity between licensed brokerage firms and MCDR. This enables both lenders and short sellers to track available offers and operations instantly and select options aligned with their investment goals.

Emphasis on Transparency and Constructive Dialogue

Dr. Islam Azzam, Chairman of the Financial Regulatory Authority, stated that the new central system managed by MCDR is designed in accordance with global best practices. It ensures full documentation of all lending stages and safeguards the rights of all market participants under complete regulatory oversight by the FRA. He explained that these live technical tests build upon the constructive dialogue conducted with market participants to overcome operational obstacles that previously hindered the activation of short selling.

Market Participants and Investor Rights

The Short Selling mechanism relies on an integrated ecosystem comprising: the Lender, the Short Seller (Borrower), the Licensed Brokerage Firm, the Custodian, and the Central Depository Company (MCDR). Regulations guarantee that lenders retain their financial rights and benefits—such as cash/stock dividends and subscription rights—during the lending period, while voting rights at general assemblies remain with the share owner as of the meeting date.

Lending Limits and Risk Management Mechanisms

To maintain market stability, the regulatory framework sets maximum lending thresholds:

Overall Limit: Securities eligible for lending must not exceed 40% of the listed company's total free-float shares.

Individual Limit: Borrowing by a single client and their related parties cannot exceed 2% of total free-float shares.

Direct Contracts: A maximum allocation of 5% is reserved for direct contracts executed between parties under the brokerage firm's responsibility.

MCDR is obligated to monitor these limits daily and mark-to-market total collateral based on closing prices. Additionally, MCDR will retain short sale proceeds and invest them in fixed-income instruments for the lender's benefit until positions are closed. The resolution also grants the FRA the authority to take decisive measures, including revoking licenses of non-compliant firms, to safeguard market stability.