Egypt's FRA Issues Regulatory Framework for EGX Short Selling Launch

On 15 March 2023, Egypt’s Financial Regulatory Authority (FRA) issued Resolution No. 155 of 2026 to establish a comprehensive regulatory framework for short selling on the Egyptian Exchange (EGX).

The issuance of this framework marks a significant development in the EGX's efforts to introduce short selling as a trading mechanism, allowing investors to sell securities they do not own with the expectation of buying them back at a lower price. This move is expected to increase market liquidity and provide investors with more flexibility in their investment strategies.

The regulatory framework was developed following extensive discussions between the FRA, EGX, Misr for Central Clearing, Depository and Registry (MCDR), and other relevant stakeholders. The framework outlines the rules and procedures governing short selling on the EGX, including the requirements for short sellers, the mechanics of short selling transactions, and the measures to be taken in case of a short squeeze.

The key parties involved in this development are the FRA, which is responsible for regulating the Egyptian financial markets, and the EGX, which will implement the new mechanism. The MCDR will also play a crucial role in facilitating the settlement of short selling transactions.

Practitioners should monitor the implementation of this framework closely, as it may have significant implications for investors and market participants. Attorneys advising clients on investment strategies or trading activities on the EGX should be aware of the new rules and procedures governing short selling.