May 3, 2022 | Investopaper
Nepal Stock Exchange (NEPSE) has implemented the Working Procedure for Margin Trading 2077 (First Amendment) as per the directives of the Securities Board of Nepal (SEBON) for providing the facility of margin trading by keeping shares pledged through securities brokers.
According to the revised procedure, the stock brokers will be able to offer margin trading facility to the customer by keeping the initial margin amounting to 30 percent of the 120-day average price of the shares or current market price, whichever is less. The member broker can also ask for more than 30 percent initial margin from the investor. Likewise, the maintenance margin for margin trading facility will be 20 percent.
Similarly, the new amendment also stipulates that brokers should maintain at least 20 percent actual margin on the basis of the final value of each day’s transaction in the margin account from the investor. In addition, a broker will be able to make a margin call to the concerned investor if the actual margin of the investor’s margin account is less than 20 percent.
The investor will have to maintain the margin of more than 20 percent by depositing cash or tradable shares within the second trading day of the margin call. Securities brokers will be able to sell any shares under the required margin account if the concerned investor does not reach the actual margin of more than 20 percent within the third working day of margin call.
If the actual margin falls to 15 percent or less after the margin call, the broker can sell the required securities without the investor’s permission to maintain the actual margin in the investor’s margin account.