On 21 October 2026, the Financial Regulatory Authority (FRA) announced that its Chairman has issued a decision approving a model short selling contract for brokerage firms and securities borrowers. The decision is issued under the regulatory framework set by FRA Board Decree No. 155 of 2026. It governs the relationship between a borrower of securities available on the central lending platform at Misr for Central Clearing, Depository and Registry (MCDR) and the licensed brokerage firm that executes transactions on the borrower's behalf.
The FRA says the contract was finalised after consultation with market participants. It sets out the roles, rights and obligations of both parties, including fees and commissions and the distribution of returns earned on invested cash collateral.
Under the contract, borrowers must post initial margin collateral, at or above the minimum set by FRA regulations, before execution. Brokerage firms must hold cash collateral in segregated accounts used only for short selling, mark borrowed securities to market continuously, and monitor the ratio of collateral to borrowed securities against the regulatory and contractual minimums. Where borrowed shares are not returned on time, the broker must execute a mandatory buy-in. The contract also lists events that require a position to be closed, such as the removal of a security from the eligible list, or corporate actions including mergers and acquisitions, tender offers, spin-offs and liquidations.
Cash collateral may be invested only in instruments approved by the FRA, and the broker must inform the client of the actual returns. Fees and commissions may not be changed without the client's explicit written consent. Borrowers must confirm the account's ultimate beneficial ownership and the legitimate source of their funds, and provide customer due diligence information under the anti-money laundering rules. Brokers must also give clients a guide to short selling and its risks, update it after any regulatory change, and provide it to clients at least once a year.
The FRA adds that it is finalising technical guidelines and practical manuals for market participants, while the MCDR Central Securities Lending system goes through live trials.