Kathmandu. Nepal Stock Exchange (NEPSE) has approved the working procedure for 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 procedure on March 26 regarding the magic trading facility. Now the way has been opened for brokers to implement this facility.
Margin Clause Arrangement
(1) It shall be the responsibility of the investor to maintain the maintenance margin required on the shares purchased under the margin transaction facility due to the fall in the market price of the shares.
(2) In cases where the investor is unable to maintain the maintenance margin, the transaction member shall make a margin call.
(3) The concerned investor shall deposit cash or margin tradable shares before the commencement of transactions on the next trading day pursuant to Sub-Section (2) of the margin call and maintain at least the maintenance margin.
(4) In cases where the concerned investor is unable to maintain the maintenance margin even after the second trading day of the margin call, the transaction member may sell any shares under the margin account required for maintaining the maintenance margin.
(5) Notwithstanding anything contained elsewhere in this procedure, if the margin of the investor in the margin account is 15 percent or less at any time after the margin call is made, the transaction member may sell such shares as are necessary to maintain the maintenance margin in the margin transaction account of the investor. In this way, the transaction member will not need the permission of the investor while selling the securities.
(6) Except in the circumstances referred to in Sub-section (5) and the maturity of the margin credit has not been renewed or the margin credit has not been repaid by paying in cash, the transaction member may not sell the shares in the margin account for any other reason.
(7) In cases where the investor is unable to maintain the maintenance margin, the transaction member may take as collateral the shares of a corporate body listed in class ‘A’, ‘B’ and ‘G’ in a securities exchange equal to the amount required to maintain the margin from the investor. The value of the shares should be calculated only at 60 percent of the market value.
(8) In cases where corporate entities listed in the shares under the margin account issue bonus shares, the bonus shares to be received by that share shall be computed on the basis of the market value while computing the actual margin of the margin account after book closure.
(9) The bonus shares to be received in the case referred to in Sub-section (8) shall ipso facto be mortgaged as collateral.
(10) In respect of right shares, the transaction member shall do as follows:
- (a) In cases where a special or general meeting of a corporate body listed under a margin account issues right shares, the transaction member may specify a separate maintenance margin for the securities based on the ratio of right shares.
- (b) In cases where the maintenance margin is insufficient due to the reasons referred to in clause (a), the transaction member may make a margin call to maintain the maintenance margin by giving a time of seven business days. If the transaction member fails to maintain the maintenance margin within seven trading days, the transaction member may sell any securities under the margin account required to maintain the maintenance margin after the eighth trading day or five days before the closing of the book.
(11) In cases where the transactions of shares under the margin account are closed due to merger, acquisition or any other reason, the transaction member may, as per necessity, demand additional security, depending on the risk. The provisions in this regard shall be mentioned in the procedure of the transaction member.
(12) If the market value of the shares in the cash or additional shares deposited in the margin account increases and exceeds the initial margin, the concerned investor may withdraw or sell the added cash or shares not less than the initial margin.
(13) In order to maintain the maintenance margin, a fee shall be levied in accordance with the rules while transferring shares from the regular beneficiary account of the investor to the margin transaction beneficiary account.
(14) The transaction member shall have to settle the accounts with the concerned investor after the sale of the shares and inform NEPSE of the same.
