Kathmandu. KATHMANDU: The Securities Board of Nepal (SEBON) is preparing to bring clear provisions regarding the financial resources to be raised by the stock brokers to provide margin trading facilities.
The Securities Board of Nepal (SEBON) in its preliminary draft of the ‘Margin Trading Facility Directive, 2082’ has made clear provisions regarding the resources that brokers can mobilize. Currently, the Securities Board of Nepal (SEBON) has sought suggestions from stakeholders on this draft.
In the preliminary draft, the Securities Board of Nepal (SEBON) has proposed that brokers can provide margin transaction facility by taking loans from banks and financial institutions from their own resources and unsecured loans from their shareholders or directors. The broker will have to abide by the provisions of the prevailing company law while taking unsecured loan from the shareholders or directors.
Similarly, the loan taken by brokers from commercial banks to facilitate margin trading and unsecured loans taken from its shareholders and directors should not be more than 4.5 times of the net worth of their institution.
The Securities Board of Nepal (SEBON) has also issued a directive that a broker will not be allowed to use the cash and shares of any client to provide margin transaction facility to other customers.
Margin Turnover Maximum Limit
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The proposed draft has a provision that brokers can provide margin trading facility up to five times of their certified net worth.
Similarly, a broker can provide margin transaction facility of more than 20 percent of his net worth to a client and a member of his or her household. Brokers should also pay attention to investment diversification while providing margin trading facilities.
