Egypt's Regulator Approves Standard Securities-Lending Contract for Short Selling

Egypt's Financial Regulatory Authority has approved a standard agreement covering securities borrowing between licensed brokers and investors, moving the country closer to short selling on the Egyptian Exchange while regulators run tests on a centralised share-lending system. The approval was announced in a cabinet statement on Wednesday.

The contract sits in Decision No. 3350 of 2026, issued by FRA Chairman Islam Azzam. It sets reference terms for collateral, borrowing fees, the return paid on cash margins and the steps brokers take when closing a position.

Requirements for brokerage firms

Firms that want to offer short selling need to clear capital and infrastructure checks before they can take client orders.

• Shareholders' equity of at least $105,000 (EGP 5 million), rising to roughly $210,000 (EGP 10 million) for firms offering short selling together with margin trading.
• An average net liquid capital ratio of at least 15% over the six months before applying.
• Trading infrastructure that meets the regulator's compliance standards.

Margin and order execution

Investors must post an initial cash margin worth at least 50% of the market value of the shares they plan to sell short. Orders also face an uptick restriction: a short sale has to execute above the last traded price, or at that price if the preceding move was upward.

Brokers are required to hold cash collateral in segregated accounts, track positions and collateral through the trading day, and disclose costs, commissions and risk to clients. Charges cannot change without the client's consent.

Limits on how much stock can be lent

The total volume of shares available for lending is capped at 40% of a listed company's free float, according to the regulator's October 13 update. Individual investors and their related parties may borrow no more than 2% of a company's free-float shares. Direct bilateral lending arrangements are limited to 5%.

The standard contract obliges brokers to revalue borrowed securities during trading and confirm that collateral still covers open positions. If a borrower fails to return shares when due, the broker must buy replacement shares. Positions can also be closed after regulatory decisions, corporate actions, or a change in a security's eligibility for short selling.

How the mechanism works

Short selling lets an investor borrow shares and sell them at the going market price, then buy them back later in the hope that the price has fallen. Falling prices produce a profit; rising prices produce losses on top of borrowing costs.

The lending platform, built and operated by Misr for Central Clearing, Depository and Registry, will let eligible participants see lending offers, borrowing terms and which securities are available.

The FRA says the mechanism should support liquidity and price efficiency by letting investors act on expectations of falling prices. Those benefits remain projections, since the system has not gone live.

The framework follows FRA Board Decision No. 155 of 2026, which rewrote the rules on securities lending and borrowing. It also comes after derivatives trading began in March 2026 and after regulations were updated to permit hedge funds. The authority is working with the exchange, the clearing house and brokerage firms on technology and operational procedures, and is running live technical tests.

No launch date has been given. The regulator has also not said how many brokers will take part at the start or what trading volumes it expects.