Eight broker houses received margin trading licenses; Margin trading to begin before new fiscal year

Thu, Jun 27, 2019 2:58 PM on Stock Market, NEPSE News, Latest,

11 broker houses were approved for margin lending by NRB however, 8 of them received the licenses today from NEPSE. Margin lending will begin before the new fiscal year. This provision is expected to revive the depressed market and make it more vibrant. NRB approved the application of margin trading of Divya Securities (59), Aaryatara Securities (57), Crystal Securities (50), Dipsikha Securities (38), Secured Securities (36), Kohinoor Securities (35), Vision Securities (34), Dakshinkali Securities (33), ShriKrishna Securities (28), Primo Securities (16) and Nepal Stock House (14) so these broker houses will be receiving licenses from NEPSE.

Margin trading is the provision of buying shares by investors even in the absence of enough capital. If any investor wants to buy share of Rs 2 lakhs but has a financial source of only Rs 1.50 lakhs, he/she can take Rs 50 thousand as margin loan. Such trading is called margin lending. The provision of margin loan will cost some interest to the investors charged by the broker houses. Bharat Ranabhat; the head of broker association said “The broker’s main source of income is commission so our aim is to increase turnover. So, we won’t be charging high interest rate and the rate will be consistent to market rate.”

The CEO of NEPSE; Chandra Singh Saud further explained “We had to face a lot of backlash due to delay in margin trading. But the truth is we needed to wait for approval from SEBON and NRB due to the involvement of complexities related to interest rates. “

However, margin trade will not be provided for and every company listed in NEPSE. For instance, those companies which have at least 10 thousand shareholders and have also provided at least 10% dividend in the last two years. Those companies should also have traded at least 80% of their shares daily and have completed their AGM within the first six months of the fiscal year.

Margin loan will be provided for three months. After three months, the loan should be renewed. There will be an agreement between broker houses and investors on different topics such as margin call, amount of margin, maturity and many more. A different account must be created for margin trading. The share traded in margin trading will be deposited in the same account. The trading report on all margin trading should be provided to NEPSE on daily basis.