SEC again experiments with margin loan to cool down market
Monday, 22 November 2010
FE Report
The securities regulator Sunday reduced the ratio of margin loan again to 1:0.5 from 1:1 in a move to cool down an overheated market.
It has also ordered the merchant banks and stock brokers not to provide margin loans to their clients during the first 30 trading days from the date of opening accounts and depositing their own funds for stock trading.
The SEC decisions will come into effect from today (Monday), and the merchant banks and stock brokers have been asked to comply with the instruction until further order.
The decisions came at a meeting of the market monitoring cell of the Securities and Exchange Commission (SEC). After the meeting SEC executive director Farhad Ahmed said the regulator has taken the move for the sake of the fresh investors as well as the stock market.
"The SEC has introduced the strategy to protect the fresh investors, who often have to face trouble by taking margin loans at the very initial stage of investment without having enough knowledge of the capital market," he said.
However, the regulator said nothing about adjustment of the margin loan, which was earlier provided at 1:1 ratio. The meeting also decided to ensure the display of necessary instructions at the DSE and the CSE website scrolls, besides giving regular circulations in the newspapers, to make the investors aware of capital market investment.
"This initiative has been taken, so that the investors can easily get the necessary instructions of the SEC," Mr Ahmed added.
The securities regulator Sunday reduced the ratio of margin loan again to 1:0.5 from 1:1 in a move to cool down an overheated market.
It has also ordered the merchant banks and stock brokers not to provide margin loans to their clients during the first 30 trading days from the date of opening accounts and depositing their own funds for stock trading.
The SEC decisions will come into effect from today (Monday), and the merchant banks and stock brokers have been asked to comply with the instruction until further order.
The decisions came at a meeting of the market monitoring cell of the Securities and Exchange Commission (SEC). After the meeting SEC executive director Farhad Ahmed said the regulator has taken the move for the sake of the fresh investors as well as the stock market.
"The SEC has introduced the strategy to protect the fresh investors, who often have to face trouble by taking margin loans at the very initial stage of investment without having enough knowledge of the capital market," he said.
However, the regulator said nothing about adjustment of the margin loan, which was earlier provided at 1:1 ratio. The meeting also decided to ensure the display of necessary instructions at the DSE and the CSE website scrolls, besides giving regular circulations in the newspapers, to make the investors aware of capital market investment.
"This initiative has been taken, so that the investors can easily get the necessary instructions of the SEC," Mr Ahmed added.