Kathmandu, Nov. 24
The Securities Board of Nepal (SEBON) has
proposed that shares of companies with at least 5 million publicly listed
shares, having a net worth greater than the paid-up capital, and distributing dividends
in at least two of the last three years will be eligible for a margin trading
facility.
In the preliminary draft of the Margin
Trading Facility Directive 2082, published on Monday, it also proposed that to
be valid for margin trading, the shares must have completed at least two years
of listing following an Initial Public Offering (IPO).
The SEBON has published the draft on its
website and sought suggestions from the concerned stakeholders within a week.
According to the draft
of the directives, securities brokers wishing to provide margin trading
facilities must hold a license issued by the SEBON for the same. They must have
a paid-up capital of at least Rs. 200 million, membership for clearing and
settlement, as well as depository services.
To conduct the margin
trading, a securities broker must collect an initial margin equivalent to the
specified percentage, calculated on the lower of either the 180-day average
price or the market price of the listed organised institution’s shares.
“The broker must
maintain separate records for shares purchased under margin trading and for
margin amounts collected from each client. The valuation of shares taken as
initial margin and shares purchased under the margin facility must be conducted
daily on a mark-to-market basis,” read the draft.
However, additional
facilities shall not be granted based on an increase in the share price.
Likewise, considering
the client’s risk profile, market conditions, and risks inherent in the shares
of listed organised institutions, the securities broker may demand a higher
margin than that prescribed by the directives, which is 30-40 per cent.
Throughout the tenure
of the margin trading facility, the securities broker must ensure that the
investor maintains a margin equivalent to the percentage specified (20-30 per
cent), based on market conditions and risk.
As per the prescribed
provisions, a securities broker may provide margin trading facilities by using
its own funds, by obtaining loans from banks and financial institutions, or by
taking unsecured loans from its shareholders or directors.
However, when taking unsecured loans from shareholders or directors, the broker
must comply with the provisions of the prevailing company laws.
“The total of loans obtained from commercial banks and unsecured loans taken
from shareholders or directors for providing margin trading facilities must not
exceed 4.5 times the broker’s net worth,” read the draft.
It has barred the securities
broker from using the cash or shares of one client to provide margin trading
facilities to another client.
The maximum limit for
providing margin trading facilities is up to five times the broker’s certified
net worth. It can’t provide margin trading facilities exceeding 20 per cent of
its net worth to any single client or to the members of that client’s immediate
household.
Published in The Rising Nepal daily on 25 November 2025.
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