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Wednesday, 27 February 2019

FRA issues regulations to activate short selling

Habemus short selling: The Financial Regulatory Authority (FRA) took a giant leap forward in the drive to bring short selling to the Egyptian Exchange when it issued regulations yesterday that allow brokerage firms to act as market makers by finding lenders and borrowers of stocks, the market regulator said in a statement. Under the regulations, you can only short 20% of a company’s freefloat shares while any one shareholder won’t be able to lend more than 5% of a company’s shares. The regulations will also cap the total percentage of any company’s shares that can be used to create a short position. Folks looking to open a short position will need to put down 50% of the value of the securities borrowed, and brokerages will be required to park that sum in fixed-income assets while the position is open.

So, what’s next? The FRA has said the EGX needs now to finalize the technical systems to support short selling and then let the FRA know when it is ready to launch the product. You can learn more about how the EGX views shorts in our sit-down with EGX Chairman Mohamed Farid.

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