Margin Trading finally makes its way; Investors able to take loan directly from the brokers

Securities Board of Nepal (SEBON) has passed the procedure for the much awaited margin trading. Before this, the investors had to face the long procedures of banks for such loans. The implementation of margin trading will be done through NEPSE. It will provide the brokers with the required directions and procedures for the implementation of margin trading.

As per Chairman of the board, Mr Rewat Bahadur Karki, the meeting of the directors convened on Thursday has approved the procedure of margin trading through brokers. With the application of margin trading the investors can receive loan from brokers for investment in shares.

The investors will be able to get maximum benefit from the implementation of margin trading as the brokers have better knowledge about the financial situation of the investors than the banks.

SEBON has already published Directives for Margin Trading, 2074 which includes 23 points related to the procedure of margin trading. According to the directive, the broker firm to provide facility of margin trading needs to have minimum net assets of Rs 5 crore. Despite various protests, the board has not amended this clause.

The broker companies can provide loan to the shareholders only for  purchasing the shares of the companies with at least 10,000 shareholders, with a positive net worth and distributing at least 10% dividend for the last two years.

The margin will be provided 50 percent of the lower of either average price of 180 days or market value to the investors. The broker companies can provide upto 2 times of its net worth as margin.

The broker companies can provide margin from its own assets or by lending from the commercial banks.