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Thursday, 6 September 2018

Short-selling to be introduced early in 2019, futures market regs under study this year

**#6 REGULATION WATCH- Short-selling to be introduced early in 2019, not this month: Shorts will be on the menu for investors in early 2019, the Financial Regulatory Authority (FRA)’s deputy chairman told Reuters yesterday. The FRA will finalize the regulations governing shorts by the end of September and then spend a few months after that “training companies to implement the mechanism,” Khaled El Nashar said. “We will be ready for implementation in early 2019 and then wait for the official decision to activate the mechanism and start using it,” he said.

El Nashar says he was misquoted the previous day when a local newspaper broke news that shorts would be introduced to the EGX at the end of September. El Nashar had previously said that short-selling regs will be strict enough to ensure that only brokerages with the balance sheet strength would be given license to do so. The rules are expected to place limits on the number of shares a short-seller can borrow for a short position and also force borrowers to pay a cash security deposit equivalent to 50% of their borrowed stocks.

The FRA will get back to work on the regulations governing a potential futures market before the end of this year, FRA boss Mohamed Omra said in a statement yesterday. An FRA committee has already put together a first draft of the regs. We had heard last month that Egyptian investors could be trading futures before the end of 2018.

The EGX is set to see a new centralized order system come online in a few days’ time, EGX Chairman Mohamed Farid told Amwal Al Ghad. The new system, which is expected to simplify trading, will give the EGX the tools it needs to offer shorts and futures, among others. No further details were provided.

Background: Amendments to the executive regulations of the Capital Markets Act, which were issued in May, opened the door to the introduction of new financial instruments to the market, such as short-selling, futures and commodities exchanges, as well sukuk, green bonds, and margin trading. The FRA is also considering introducing regulations for licensing brokerage firms as market makers, which would allow them to both buy and sell securities from their own inventory at prices which they have a measure of control over. The tools are part of a four-year strategy to develop Egypt’s non-banking financial sector.

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