FRA Approves EGX reviewed Criteria of Shares Eligible for Short Selling

Tuesday, 11 August 2020


The Financial Regulatory Authority (FRA) adopted the Egyptian Exchange’s (EGX) proposal amending selection criteria of short selling, as a step to increase securities eligible to trade in this mechanism.

In its proposal, EGX provided a study of the expected impact on securities and accordingly on liquidity and trading in the Egyptian market, presenting the limited number of stocks traded, which reinforced the need to diversify and allow more qualified securities to trade.  The study was conducted for the period from December 2019 to the end of June 2020.  Accordingly, EGX suggested adjusting the market capitalization ratio of company’s free-float to be reduced from 0,005 currently applied to 0,001.

Worth mentioning that the 7 quantitative criteria for the selection of securities eligible for short selling, after studying best global practices in this regard, are namely; market capital of free-float shares or daily average trading values of the stock, trading days, daily average of brokerage firms, daily average investor, and number of shares of the issuing company. 

Currently, stocks eligible for shorting are 29 and ETFs.  The new list of stocks eligible for the mechanism of borrowing for the purpose of selling, will be announced tomorrow, to be allowed to deal trade starting from the trading session next Wednesday, 12 August 2020.

Dr. Mohamed Farid, Executive chairman of EGX, said that the development of criteria of short selling mechanisms, came within EGX’s management keenness to accelerate and activate the new mechanism to enhance liquidity and trading, “It is now the role of brokerage firms to activate short selling in the Egyptian Market”.