The Financial Regulatory Authority (FRA) has granted its approval to four companies to carry out securities borrowing operations for short-selling purposes. The companies are Hermes Securities Brokerage (HSB), Financial Brokerage Group (FBG), Commercial International Brokerage Company (CIBC), and Arab African International Securities (AAIS).
Earlier this month, the FRA has issued the first short-selling licence to Arqam Securities Brokerage as part of the authority’s efforts to activate the securities borrowing system in Egypt in order to raise the values and volumes of trading in the Egyptian stock market.
The required technology structure to implement short-selling mechanism between the Misr for Central Clearing, Depository, and Registry (MCDR), the Egyptian Exchange (EGX), and brokerage companies will be finalised soon.
In short selling, a position is opened by borrowing shares of a stock or other asset that the investor believes will decrease in value by a set future date—the expiration date. The investor then sells these borrowed shares to buyers willing to pay the market price. Before the borrowed shares must be returned, the trader is betting that the price will continue to decline and they can purchase them at a lower cost.
Noteworthy, the FRA chairperson issued in February the regulatory decision No 268 for the year 2019 on the rules of securities borrowing operations with the purpose of short-selling to activate the mechanism, while the EGX and MCDR would prepare the technical requirements for activating the mechanism.