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Sunday, 19 May 2019

EGX issues criteria for short selling securities

REGULATION WATCH- Would-be shorts, rejoice: The EGX has issued criteria for selecting securities eligible for short selling, it said in a press release (pdf). You can short a total of 29 securities, as well as ETFs, the EGX said. The list of eligible securities will be reviewed every six months. Eligible shares will need to meet a threshold qualifying them as frequently traded, and at least 10% of registered brokerage firms need to be trading the share in question. The freefloating shares must have a turnover rate of 20%.

There’s an anti-bullying provision: Shorts won’t be able to pick on the little guy: You can’t short a stock unless its shares in freefloat account for a minimum of 0.005% of the market’s total freefloating shares, and any stock that’s going to be shorted has to have at least 300 mn issued shares.

Background: The Financial Regulatory Authority (FRA) earlier this year issued regulations for short selling on the EGX, allowing brokerage firms to act as market makers by finding lenders and borrowers of stocks. Under the regulations, you can only short 25% 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 20% in fixed-income instruments while the position is open.

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