MCDR, a private joint-stock company regulated by the state, provides clearing, settlement, and central depository services for all securities traded on the EGX.

Short selling is a mechanism that allows investors to profit when they expect the price of a stock or other eligible security traded on the Egyptian Exchange (EGX) to fall.

Under the mechanism, investors borrow securities from a lender, typically through a brokerage firm, and sell them at the current market price, while depositing cash as collateral. If prices fall as expected, they buy back the securities at a lower price, return them to the lender, and make a profit.

If prices rise instead, investors must buy back the securities at a higher price, resulting in a loss.

In both cases, lenders earn a return by allowing their securities to be borrowed through lending fees paid by borrowers, while retaining the other benefits of ownership.

The FRA said the mechanism aims to improve the efficiency of the Egyptian Exchange (EGX), increase market liquidity, and expand investment opportunities for both investors and lenders.

It added that the framework supports the government's efforts to deepen the capital market, broaden the range of investment instruments, diversify ownership, and advance the stock exchange's digital transformation and market development agenda.

The authority said the move is also expected to encourage wider participation in the capital market. Egypt currently has between 250,000 and 300,000 investors, with around 180,000 new investors expected to join this year.

MCDR has established a central lending system to manage all stages of short-selling transactions on the EGX and integrate the process with brokerage firms.

The system will verify loan documentation, display information on loan amounts, terms, and interest rates, and record lending, borrowing, and settlement transactions.

Under the FRA framework and MCDR's oversight, participation in short selling by foreign and younger investors is expected to increase. The mechanism is also expected to provide more opportunities to benefit from market price movements and reinvest profits.

Egypt has been working to strengthen transparency and corporate governance by developing its stock market and maximizing returns from state-owned assets through its initial public offering (IPO) programme.

The government has also been improving tax administration to support fiscal reform, attract private investment, and promote a more private sector-led growth model.