A new central lending pool to facilitate short selling, which is the borrowing of a security in order to sell it & buy it back later for less, could be introduced in an effort to resuscitate the practice, according to FRA Chairman Dr. Mohamed Farid.
What
Currently, investors wishing to “short sell” a security must go through several parties to do so. The lending pool would allow investors to directly short sell the stock without going through these parties.
So What
Although short selling allows investors to profit in the event a security’s price falls, it is a risky practice that can potentially result in a loss that exceeds 100% of the total investment, because there’s no limit to how high a security’s price can rise, & therefore no limit to the losses one can incur.
Now What
There are currently 66 securities on the EGX eligible for short selling.
