Kathmandu, December 4

Nepal Stock Exchange (Nepse) has expedited the procedures to begin margin lending facility for the secondary market investors from the brokerage firms. As per the directions from Securities Board of Nepal (SEBON) — the capital market regulator — Nepse is formulating the procedures for margin trading.

According to Chandra Singh Saud, general manager of the Nepse, it has started discussions with concerned parties to finalise the procedures of margin trading. “We have called a meeting with brokers to discuss the procedures for margin trading, and we will also hold discussions with the investors in the next few days,” he informed.

SEBON has directed Nepse to prepare margin trading procedures following its guidelines to operate margin lending facility from the brokerage firms. “SEBON has instructed us on a few areas, and we will finalise the procedures and submit it to the regulator as soon as possible,” Saud said.

Meanwhile, Priya Raj Regmi, chairman of Stock Brokers’ Association of Nepal (SBAN), also informed that Nepse and SBAN had held preliminary discussions on the procedures that are expected to be finalised within next few days.

“Brokerage firms are ready to operate the new facility, however, the legal framework is not completed yet. We are eagerly waiting for it,” Regmi said.

SEBON had issued a directive on margin trading on November 6, paving way for the investors to obtain loans from the brokerage firms to purchase stocks from the secondary market.

As per the directive issued by the regulator, the brokerage firm wishing to extend margin trading facility to their clients must have net worth of Rs 50 million. Value of the stocks should be calculated on the basis of 180 days’ average or current market price of stock, whichever is lower, while extending loans and the brokerage firms have to take 50 per cent of the value as initial margin.

Though the SEBON has extended facility of margin trading, the facility of margin lending from the banks and financial institutions under the regulation of the Nepal Rastra Bank will continue. The securities market regulator expects that the margin trading will facilitate investors in share trading and increase the liquidity in the secondary market.

“As per our earlier directions, Nepse will finalise the procedures, which will come into force after receiving authentication from SEBON,” Niraj Giri, spokesperson for SEBON, said.