The Securities Board of Nepal (SEBON) has granted official permission for margin trading, enabling investors to acquire stocks by paying only a fraction of the total price upfront. According to these new regulations, an investor must contribute at least 30% of the investment as an initial payment, while the stockbroker funds the balance as a loan. To ensure security, investors are mandated to maintain a minimum balance of 20% of the investment’s worth in their account. If the stock price declines and this balance falls below the threshold, the broker will issue a ‘margin call,’ asking for additional funds. Should the account value decrease further to 15%, the broker is empowered to sell the shares to recover the loaned amount.
This option is not accessible to all companies; it is confined to reliable firms that have been listed on the exchange for a minimum of two years and have reported profits in two of the last three years. Moreover, qualified companies must possess at least 2.5 million shares available to the public. To offer this service, brokerage firms must maintain a minimum capital of Rs. 20 Crore and secure specific approval from both the Nepal Stock Exchange (NEPSE) and the Nepal Rastra Bank. This initiative is projected to stimulate market activity by giving investors enhanced buying power, although it also carries the risk of accelerated losses if stock prices decline.
