Financial Control Authority completes first training program on 'short selling' for securities brokerage firms

Cairo - Nadeh Imam: The General Authority for Financial Supervision (GAFS), chaired by Dr. Islam Azam, organized the first-of-its-kind training program to prepare and qualify personnel of brokerage firms and financial institutions on the new regulatory and operational framework for the “short selling” mechanism (borrowing securities for the purpose of selling / selling borrowed securities), in light of the Authority’s Board of Directors Decision No. 155 of 2026.

The program was implemented by the Financial Services Institute, the Authority’s training arm, with participation from lecturers Hanan Hamdy and Amr Al-Saudi. More than 100 trainees from 42 brokerage firms and financial institutions attended the training to serve as officials responsible for executing and monitoring short selling operations.

The regulatory decision governing the mechanism requires every brokerage firm seeking a license to conduct such operations to have at least one designated official specialized in short selling operations and their monitoring. This official must meet a set of conditions, including passing the examinations or training courses specified by the Authority.

The initiative aims to equip these officials with comprehensive practical knowledge of the regulatory framework, clarify the roles and responsibilities assigned to each party, and thereby support companies in aligning their operations and fulfilling the necessary regulatory and technical requirements.

The program sought to enhance participants’ understanding of the mechanism’s implementation controls, collateral management, monitoring of coverage ratios, settlement of valuation differences, closure of open positions, and return of borrowed securities, as well as the relevant technical and supervisory requirements.

The program provided a detailed explanation of the provisions and controls of the new regulatory framework for short selling, distributed across 13 topics: the general framework of the mechanism, the new central lending system, conditions and controls for conducting operations, obligations and rights of both the brokerage firm and the borrowing client, the role of the Central Depository and Clearing Company “Misr Clearing,” lending and borrowing limits and ratios, the role of the custodian, availability of securities and collateral management, closure of borrowing positions and return of securities, rights and benefits associated with prescribed corporate actions, direct contracts between the brokerage firm and the lending or borrowing client, technical and supervisory requirements, and finally, the model contract between the brokerage firm and the borrowing client, recently issued under Authority Chairman Decision No. 3350 of 2026.

Dr. Islam Azam, Chairman of the General Authority for Financial Supervision, stated that the training program represents a new implementation step toward launching short selling, as the Authority continues to complete regulatory aspects and practical guidelines for all parties involved in the mechanism, thereby enhancing technical and regulatory readiness. This runs parallel to finalizing the central lending system developed and managed by Misr Clearing through live trials.

He added that the training program for personnel is not merely a fundamental licensing requirement for brokerage firms wishing to conduct short selling operations and improve the efficiency of all parties involved, but also constitutes one of the pillars of the Authority’s awareness and capacity-building plan, aimed at ensuring the optimal launch of the mechanism and achieving its intended impact on the capital market.

Previously, the Authority broadcast a comprehensive lecture on its official website, social media accounts, and YouTube platform, directed at investors and specialists. Delivered by Dr. Islam Azam, the lecture covered the elements and benefits of short selling, as well as the details of obligations for all parties involved in the process: lenders, borrowers, brokerage firms, Misr Clearing, and custodians. The lecture also explained how the new central lending system works, which records in real time all stages and procedures

The system allows borrowing clients to view all available lending offers from lending clients and select those that align with their investment objectives, as well as enabling lending clients to see all other lending offers registered through the system. The Authority also published a number of videos and awareness posts on its official accounts regarding “short selling,” the nature of financial returns and their investment and distribution, and the difference between this mechanism and margin buying, as well as the benefits of combining both mechanisms in the Egyptian Stock Exchange in terms of pricing efficiency and market activation. Notably, a borrowing client in a “short selling” mechanism realizes a profit if their expectation of a decline in the price of the borrowed securities materializes; they repurchase the securities at a lower price, capture the price difference, and then return them to the lender, with the borrowing cost deducted from the profit. Conversely, if the security’s price rises and the borrower wishes to limit losses, they repurchase at a higher price, incurring a loss, and then return the securities to the lender, with the borrowing cost added. In both cases, the lender receives a return for lending its securities, approximating the risk-free rate, plus the required return for lending and other benefits arising from its ownership of the shares.