EGYPT · MARKETS

Short selling is a bet that a share price will fall: an investor borrows stock from someone who owns it, sells it, then buys it back later and hands it over, keeping the difference if the price dropped. Short selling on the EGX — the Egyptian Exchange, Egypt’s stock market — has been legal on paper since 2018 and went live in December 2019. Almost nobody used it. Egypt’s Financial Regulatory Authority issued a new framework on Wednesday, 19 August that tries again — total cover of 150% of the position, a ceiling of 40% of a company’s free float, and a central lending system run by the country’s clearing house.

El Sherifein Street in downtown Cairo, the block known as El-Borsa, where the Egyptian Exchange has its headquarters. Egypt’s regulator issued its short-selling rulebook, Board Resolution 155 of 2026, on 19 August 2026. (Photo: Waled ibarhim, Public domain, Wikimedia Commons.)

What the new rules on short selling on the EGX actually do

The framework arrives as Financial Regulatory Authority Board Resolution 155 of 2026, issued by the authority’s board under its chairman, Dr Islam Azzam. It governs both halves of the trade: the lending of the securities and the sale of the borrowed stock.

This is not Egypt’s first attempt. The authority approved short selling in amendments to the Capital Market Act in 2018, the mechanism went live on the EGX in December 2019 with a list of eligible stocks, and it produced almost no trades. A further framework, Decision 365 of 2026, was issued in February with a 25% free-float cap. Every sale must be covered: the shares have to be borrowed before the order goes in, so selling stock nobody has lent you, known as naked short selling, is not allowed. The authority says the new rules were written to fix the practical problems that surfaced in those trial phases.

The plumbing sits with Misr for Central Clearing, Depository and Registry, known as MCDR. It will build and operate a Central Lending System recording which securities are available, in what quantity, for how long and at what rate.

Both sides of a loan see the same book. According to Daily News Egypt, which reported the resolution, that visibility is meant to let lenders and borrowers match their intentions without a private negotiation.

The safeguards Cairo has written in

Cover runs to 150% of the position: the full value of the borrowed shares, plus cash margin worth at least half that value on top, posted before the trade goes through. Positions are then revalued during the session.

If collateral slips to 140% of the borrowed stock’s value, a margin call follows, and the borrower has two working days to restore it to 150%. Missing that deadline forces an automatic return of the shares.

There is also an uptick rule of the kind familiar from other markets. Borrowed shares may be sold only at or above the last traded price, and only where that last price change was an increase.

The effect is to stop a short seller pushing a falling stock lower with a succession of cheaper offers. It is a brake rather than a prohibition.

Ceilings that keep the trade small at first

No more than 40% of a listed company’s free float may be out on loan at any one time — a loosening, since the February framework capped it at 25%. Not every listed share qualifies: an exchange notice in January restricted securities lending and borrowing to the 30 companies in the benchmark EGX 30 index and the exchange-traded fund that tracks them, and the authority can pull a stock from the list. A single borrower, counted together with related parties, is capped at 2%.

Within that 40%, a maximum 5% is set aside for contracts arranged directly between a broker, a lender and a borrower. That carve-out gives large holders a route outside the central book.

Brokers face a capital bar as well. Minimum net equity is EGP 5 million, about US$99,000, doubling to EGP 10 million, roughly US$197,000, for firms that also run margin trading, alongside an average liquid capital ratio of at least 15% over the previous six months.

Lenders keep the economics of the shares they lend out. Cash and in-kind dividends and subscription rights remain with them throughout. The vote at general meetings does not: the authority is explicit that it belongs to whoever holds the borrowed security on the date of the meeting.

The last piece of a three-part build

Egypt has spent 2026 assembling the machinery of a modern equity market rather than announcing one reform at a time. The derivatives market opened on 1 March with EGX30 index futures, which already gave investors a way to take short exposure.

The authority issued the country’s first hedge-fund regulations on 9 August, according to Daily News Egypt. The short-selling framework followed ten days later.

Read together, the sequence matters more than any single piece of it. A fund manager who cannot hedge a position will often decline to take it at all.

That is the case for two-way risk in a cash market that has been almost entirely one-directional. It is also the case foreign institutions have been putting to Cairo for years.

Why market plumbing is the story

Market structure rarely makes headlines, and it is usually what decides whether outside capital shows up. Index providers and large allocators look at settlement, lending and hedging long before they look at valuation.

Egypt is not alone in this work. Other African exchanges have spent recent years on the same unglamorous layer.

What stands out in Cairo is the pace. Three distinct pieces of market infrastructure inside six months is a compressed programme by the standards of any frontier or emerging exchange.

What has not been settled

No launch date has been published. The resolution takes effect the day after it appears in the official gazette, and brokers then have a month to finish building the technology.

Short selling has been announced in Egypt before and quietly shelved, a history the authority’s own framing acknowledges. EGX executive chairman Omar Radwan said in early August that final system testing was under way and that launch was close. The test is whether the first trades actually print — which is exactly where the 2019 attempt failed.

The wider backdrop is a market that has held foreign attention through a difficult stretch. Egypt’s US$8 billion arrangement with the International Monetary Fund now runs to 15 December 2026, putting the reform calendar and the programme calendar on the same clock.

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