Short selling rules are formulated

Thursday 02 August 2018 01:31 PM


By Sherif Omar:
The advisory committee on the capital market has finalized the regulations of launching the mechanism of borrowing securities with the purpose of selling (short selling) in preparation for forwarding them to the Financial Regulatory Authority (FRA) to be adopted by the end of the third quarter.
Sources told Al Mal newspaper that the group held a meeting on Tuesday in the presence of state-owned enterprises minister Hesham Tawfik as a former committee member before serving as a minister.
It should be recalled that short selling is the sale of a security that is not owned by the seller or that the seller has borrowed. Short selling is motivated by the belief that a security's price will decline, enabling it to be bought back at a lower price to make a profit.
The sources explained that action items of short selling were agreed upon. This mechanism allows brokerage firms with margin purchase license to apply for obtaining the short selling license.
Short selling clients are required to deposit a cash amount equivalent to 50% of the value of borrowed shares as a security for short selling transactions, the sources added.