Kathmandu. Nepal Stock Exchange (Nepse) has approved the working procedure related to margin trading facility.
The Securities Board of Nepal (SEBON) had issued a directive on February 11 regarding margin trading facility. The directive states that margin trading facility will come into effect from March 21. However, NEPSE has issued the work process related to magic trading facility today. Now this feature will be applicable.
The provisions mentioned in the guidelines have been maintained in the procedure. As per the provision, at least 25 lakh units of shares of the company should be listed for margin trading. Companies with net worth equal to and more than paid-up capital, net profit of 2 years in the last 3 years, IPO issued, at least 2 years of share listing are eligible for margin transactions.
Similarly, various provisions have been made regarding the qualifications of stock brokers who provide margin trading facility along with companies eligible to do margin transactions. Brokers with a paid-up capital of at least Rs 20 crore can avail margin transactions.
Similarly, brokers who have obtained RafSAF membership, depository membership and fulfilling other provisions specified by the Nepal Stock Exchange (NEPSE) will be eligible to avail margin trading facility. This facility can also be provided to the depository member or the depository member who is the shareholder of the company or the main company of the securities broker business which is a subsidiary company.
Brokers will be able to provide margin trading facility up to 5 times of their verified net worth. While providing margin facility to a client or a member of his or her family or affiliate, the broker shall not be allowed to provide margin transaction facility more than 10% of the total margin facility that the broker can provide.
Similarly, the directive clearly states that the broker should pay attention to investment diversification while providing margin trading facility.
The broker should identify the shares purchased under the margin trading facility on a daily basis or after the transaction or at the time of settlement. To avail this facility, the investor has to open a separate margin trading account and a margin trading beneficiary account with the broker.
The broker (RFSAF) will have to open a margin trading beneficiary account in the central deposit company for the purpose of settlement. The margin transaction beneficiary account of the investor should be linked to the margin trading account opened by the broker and the margin transaction of the member of the RAFSAF beneficiary account.
While providing margin trading facility to the investors, the broker will be able to take the Margin Transaction Account and the Margin Transaction Beneficiary Account Operating Officer. If the investor fails to repay the amount and liabilities taken by the investor for the margin transaction facility or fails to maintain the operating margin, the broker should use authorized warrants only for the purpose of selling and clearing the shares. The details of the action taken in this regard should also be reported to the Securities Exchange (NEPSE).
If margin trading can be provided from the investor’s trading account in the broker’s trading system, there will be no need for a separate margin trading account.
margin trading
