Arab Finance: The Financial Regulatory Authority (FRA), chaired by Islam Azzam, has reviewed the new regulatory framework for short selling on the Egyptian Exchange (EGX), which is expected to be issued within days, according to a statement.

Azzam said the framework reflects the FRA's commitment to maintaining an ongoing dialogue with stakeholders and incorporating their feedback into new regulations. This will allow market participants to keep pace with recent developments while enhancing the attractiveness of Egypt's capital market for both local and foreign investments.

Short selling, or selling borrowed securities, allows investors to profit from an expected decline in a stock's price. Under the mechanism, an investor borrows shares from an existing shareholder through an authorized intermediary and immediately sells them in the market at the current price.

The investor later buys back the same number of shares to return them to the lender. If the share price falls, the investor repurchases the shares at the lower price, returns them to the lender, and earns a profit after deducting borrowing costs.

If the share price rises, the investor must buy back the shares at a higher price, resulting in a loss in addition to the borrowing cost. Meanwhile, the shareholder who lends the securities earns a lending fee while retaining the economic benefits associated with share ownership.

Meanwhile, the FRA is coordinating closely with the EGX, Misr for Central Clearing, Depository and Registry (MCDR), and other market participants to finalize the launch of short selling after years of technical, legal, and operational preparations.

Azzam urged brokerage firms and market participants to complete their technical and operational readiness to benefit from the new system as soon as it becomes effective.