Egypt Sets 50% Cash Collateral Limit in New Rules For Short Selling

AFRICAN STOCKS AND FINANCEAugust 21, 2026 at 12:09 PM UTC

TLDR

Egypt introduces new rules for short selling on the Egyptian Exchange, requiring 50% cash collateral for borrowed securities.
Misr for Central Clearing, Depository, and Registry (MCDR) oversees the lending platform, monitoring daily transactions and collateral revaluation.
Short positions limited to 40% of free-float shares, with brokers needing EGP 5 million equity for short selling and EGP 10 million for margin trading.

Egypt has issued new rules for short selling on the Egyptian Exchange, requiring investors to provide cash collateral equal to at least 50% of the market value of borrowed securities. The Financial Regulatory Authority approved the framework under Resolution No. 155 of 2026 as part of efforts to increase trading and add more investment tools to the market.

Short selling allows an investor to borrow shares, sell them and buy them back later. The investor makes money if the price falls but faces losses if it rises. Under Egypt’s system, Misr for Central Clearing, Depository and Registry will retain the proceeds from the share sale, while brokers must collect the additional 50% cash collateral before a trade. This means the system starts with coverage equal to 150% of the borrowed shares’ value.

MCDR will run a central lending platform connecting the exchange, brokers and custodians. It will record transactions, monitor limits and revalue borrowed shares and collateral each day. Sale proceeds will be invested in fixed-income instruments or other products approved by the FRA until the position closes. Lenders will receive lending fees and keep rights to dividends and other financial benefits.

The rules also limit the amount of stock that can be borrowed. Short positions may not exceed 40% of a company’s free-float shares. A single lending arrangement is capped at 5%, while one investor and related parties may borrow no more than 2%. Only securities that meet criteria set by the EGX and approved by the FRA will qualify.

Brokers need at least EGP 5 million of shareholders’ equity to offer short selling and EGP 10 million if they also provide margin trading. They must maintain a net liquid capital ratio of at least 15%. Existing approved firms have 1 month after publication of the rules to install the required systems before the framework takes effect.

Key Takeaways

Short selling adds a tool that has been missing from Egypt’s stock market. Until now, most investors could make money mainly by buying shares and waiting for prices to rise. The new framework allows investors to take positions when they expect eligible stocks to fall, while giving lenders another way to earn income from shares they already own. The 50% cash requirement is designed to limit risk: investors must post that collateral while MCDR keeps the full proceeds from selling the borrowed shares, creating initial coverage equal to 150% of the position. Daily revaluation means losses from a rising share price must also be covered as they occur. The limits on individual investors, brokers and total borrowed shares are meant to stop short positions from becoming too concentrated. For the EGX, the larger goal is liquidity and pricing. Short sellers can add trading activity and provide buyers when positions are closed, while also allowing investors to express negative views on a company rather than staying out of the market. The reform follows Egypt’s work on hedge funds, derivatives and market makers, creating a wider set of tools for local and foreign investors.

Finance