Look at some of the implications of the 5th amendment in Securities Central Depositary Service Regulation, 2068

Securities Exchange Board of Nepal (SEBON) had recently informed the investors regarding the amendment in Securities Central Depositary Service Regulation, 2068 allowing, investors to use margin trading facility through brokers.

Since, there was no arrangement for margin trading in the dematerialized system, brokers licensed by the NRB to provide margin trading facilities were unable to do anything in this regard. In order to implement the Margin Trading services in the capital market, it requires a separate BOID (Beneficiary Id) for trading and settlement. However, in the existing Securities Central Depositary Service Regulation, 2068 such provision was not available. Therefore, the proposal for 5th amendment in Securities Central Depositary Service Regulation, 2068 sent by CDS and clearing regarding the same has been approved by SEBON.

Similarly, once the appropriate system is ready, SEBON has directed CDS and Clearing to inform Securities market, Depositary Participants and Settlement Agents.

The following brokers have received approval from the NRB to provide margin trading facility: Crystal Securities (50), Kohinoor Investment (35), Araya Tara Investment (57), Dakshinkali Investment (33), Deevyaa Securities (59), Dipshika Dhitopatra (38), Secured Securities (36), Vision Securities (34), Shree Krishna Securities (28), Primo Securities (16) and Nepal stock house (14). The remaining broker houses are in the pipeline to receive the approval.

Brokers are allowed to provide this facility through the use of their own fund or by getting the required funds through banks. The brokers will allowed to lend twice their net worth for margin trading. They will be required to keep a maintenance margin of 40% citing the risks in the secondary market.

The brokers cannot lend more than 10% of lending capacity to a single client or multiple clients from same family. The brokers will be required to disclose all information relating to the facility like, initial margin, maintenance rate, margin call, service fee etc.

Securities purchased through margin facility are to be archived separately by the brokers and the audited record of trade will be submitted to audit board and SEBON as per the regulations relating to the amendment.