Brokerage firms have not been able tostart margin trading facility because of the delay in issuance of workingprocedure for the facility by the Nepal Stock Exchange (Nepse).

Securities Board of Nepal (Sebon), thecapital market regulator, had issued a directive, allowing brokerage firms toprovide such service more than a month ago.

The new service that allows shareholdersto get financing facility for purchasing shares can come into operation onlyafter the Nepse and the brokerage firms get their working procedure on margintrading facility endorsed from the Sebon. However, the Nepse has not submittedits working procedure to the Sebon for approval yet. This means that that thenew facility will take some time to start.

Nepse officials claim that the draft ofthe working procedure has already been prepared and that it would be forwardedto the Sebon for endorsement once it is approved by the stock exchangecompany's board. “The draft will be presented in the next meeting of the boardof directors of Nepse,” Murahari Parajuli, the spokesperson for Nepse, toldRepublica.

The date for the board meeting, however,has not been fixed yet, according to Parajuli.

Earlier in the first week of November,the Sebon had issued 'Directives Related to Margin Trading Service, 2017',paving the way for stock brokerage firms to provide margin trading services totheir clients. The new facility aims to make it easier for investors to tradeshares and expand the scope of business for brokerage firms.

Stock brokerage firms are only allowedonly to execute trading orders placed by their clients in the secondary marketso far.

Brokerage firms say that they arewaiting for the Nepse's working procedure to prepare their operationalprocedure for margin trading facility. “We will prepare our operationalprocedure after Nepse's working procedure is approved by the Sebon, and thetrading and clearing system is harmonized,” Priya Raj Regmi, president of StockBrokers Association of Nepal (SBAN), told Republica. “We cannot move ahead beforethe Nepse's working procedure is approved as that working procedure will form astandard for brokerage firms to prepare their operational procedure for suchfacility,” he added.  

This facility allows shareholders to buysecurities in the market even if they do not have the money required with thefinancing from a brokerage firm. Once brokerage firms start providing margintrading services, stock investors no longer have to depend on only the bank andfinancial institutions (BFIs) to get loans for buying shares in the secondarymarket.

Source: MyRepublica, 19^thDecember 2017