The Nepal Securities Board (SEBON) has approved the “Margin Trading Facility Directive, 2082” in accordance with Section 118 of the Securities Act, 2063, and decided to implement it from Falgun 1, 2082. With the implementation of this directive, investors will now be allowed to conduct margin trading through licensed broker companies.
According to the directive, only shares of listed companies meeting specific criteria will be eligible for margin trading. Eligible companies must have at least 2.5 million public shares listed, a net worth equal to or higher than paid-up capital, profits in at least two of the last three fiscal years, and must have completed two years since IPO listing.
Broker companies intending to provide margin trading facilities must also meet certain requirements. These include a minimum paid-up capital of Rs. 200 million, clearing membership, and compliance with depository participant (DP) regulations. Brokers are also required to obtain approval from the securities market authority before offering margin services to investors.
The directive mandates a minimum initial margin of 30 percent and a maintenance margin of at least 20 percent. If a share price falls below the required margin level, brokers are authorized to issue a margin call to investors. If the investor fails to maintain the required margin, the broker is permitted to sell the concerned shares to recover the amount.
Broker companies may provide margin facilities using their own funds, loans obtained from banks and financial institutions, or unsecured loans from shareholders. However, such borrowing must not exceed 4.5 times the broker’s total net worth. Additionally, no single client may receive more than 10 percent of the total margin facility provided by a broker.
For margin trading, investors are required to open a separate margin account and demat account. Broker companies must submit daily transaction details to the securities market. The directive also requires clear disclosure of risk assessment, written agreements, service charges, interest rates, and margin call procedures to ensure transparency and investor protection.
This article was originally published on https://bajarkochirfar.com. Translated with the help of AI and reviewed by our editorial team.
