The regulatory and operational framework

The regulatory and operational framework for securities borrowing for short selling was designed to qualify the staff working in brokerage firms, financial institutions, and banks to understand and apply the regulatory and operational framework for the short selling mechanism, in light of the decision of the Financial Regulatory Authority No. 365 of 2026. The program focuses on the legislative, regulatory, and operational aspects of the mechanism, ensuring that participants can execute the related operations efficiently and professionally, with full compliance with the regulatory controls and associated risk management. This contributes to enhancing institutional performance and strengthening compliance with the authority’s requirements.

The program’s objectives are to establish a Regulatory and Operational Framework.

The program aims to enable participants to understand the legislative and regulatory framework for the mechanism of borrowing securities for the purpose of selling and to learn about the practical implementation mechanism of borrowing operations and the role of various parties in the market, in addition to acquiring the necessary skills to efficiently manage operations related to borrowing, settlement, and collateral. It also aims to enhance participants’ ability to analyse financial feasibility and make decisions under different market scenarios, understand the contractual and procedural aspects related to these operations, and comprehend the rights and obligations of the various parties, thereby contributing to improving risk management efficiency and adherence to regulatory and institutional controls. This course is part of providing participants with the necessary knowledge and skills to implement this mechanism efficiently, with full adherence to legislative controls and associated risk management, thereby supporting the enhancement of institutional performance and ensuring compliance with the authority’s requirements.

Target groups

Employs of brokerage firms in securities.

Employs of financial institutions and banks. 

Agenda of the Regulatory and Operational Framework Program

For the general and legislative framework

• Introduction to financial markets and the mechanism of short selling
• The concept of borrowing securities and its importance in the market
• The difference between:

– Margin buying

– Borrowing securities for the purpose of selling

• The regulatory legislative framework
• Conditions for granting licenses to brokerage firms

Operational and executive aspects

• Mechanism for executing borrowing operations

– Order entry

– The role of the brokerage firm

– The role of the central depository and registration company

• Central lending system

– How the system works

– Recording transactions

• Guaranties (Margin System)

– Margin of guaranty

– Total warranty

– Guaranty ratios (150% – 140% – 130%)

Practical cases and decision-making

• Practical cases on borrowing securities for the purpose of selling
• When is the decision to borrow made?
• Scenario analysis:

– When does the investor make a profit?

– When does he incur a loss?

• Cost of decision-making assessment:

– Cost of borrowing

– Opportunity cost

– Potential risks

The procedural and contractual framework

• The practical procedures for executing the borrowing process
• Steps for the client to deal with the brokerage firm
• Form and model of the securities lending contract
• Contractual obligations on the parties
• The role of the settlement guaranty fund in covering risks

Rights associated with borrowed securities

• Rights of the borrower and the lender
• Dealing with profit distributions (coupons):

– Who is entitled to the coupon?

– The settlement mechanism between the borrower and the lender

• Voting rights
• Handling in cases of material events

Clearing and settlement and expansion of activity

• The role of the clearing company in settling transactions
• The mechanism for daily transaction settlement
• How to expand borrowing thru the clearing company
• Customer Center Management

Corporate oversight and supervision

• The role of the General Authority for Financial Supervision:

– When does intervention occur?

– Tools for monitoring and supervision

• Periodic reports:

– Reports from brokerage firms

– Stock exchange reports

• The role of the stock exchange in monitoring operations
• The role of the membership committee in the stock exchange in organizing and monitoring activities.

Management of operations and special cases

• Monitoring daily operations
• Ending borrowing operations:

– Response from the balance

– The response is to purchase

• Special cases:

– Merger

– Acquisition

– Trading halt

• Management of operational risk

Program duration

24 training hours – 3 days