SEC revises margin loan criteria to cool down overheated market

---

FE Report
The Securities and Exchange Commission (SEC) has revised the margin loan criteria against listed securities in its latest move to cool down the overheated market.
The SEC said Tuesday the brokerage houses from now on will provide margin loans at the ratio of 1:1.5, revised upward from 1:2, and investors buying shares of a company, the maximum PE (price-earning) ratio of which is 50, will be eligible for the margin loans.
Earlier, the maximum PE ratio required for securing a margin loan was 75.
The SEC also directed both the bourses of the country to submit their reports on the capital balance of the brokerage houses by February 10.
The existing rule says no client will receive more than 25 per cent of the net capital balance of a brokerage house.
An SEC spokesman said the move was taken to lessen the risk run by investors and ensure fair distribution of margin loans, provided by the brokerage houses.
"The SEC has taken the decision for sustainable development of the capital market and protect the interest of the investors," SEC spokesman and Executive Director Anwarul Kabir Bhuiyan told the FE.
"Sometimes it becomes difficult to monitor the overall loan facilities provided by the brokerage houses, so the SEC directed both the bourses to submit their reports on the market balance," he added.
On the first trading day of this year, January 3, the DSE General Index reached 4568.404.
However, on February 1 (yesterday), the DSE General Index hit 5451.1513. Within the last one month, the DSE General Index increased by 882.747 points. Recently, the DSE president also admitted that the shares of about 40 per cent securities were over-valued. Against this backdrop the SEC set the new margin loan criteria.