Securities and Exchange Commission tightened further margin loan facility

Securities and Exchange Commission (SEC) has tightened further the margin loan facility to ease the liquidity glut and bring the overpriced stocks under control.

The commission at a meeting today decided to bring down the loan margin ratio to 1:0.5 from the existing 1:1, meaning investors will be allowed to get a loan amount of Taka 50 against their shares of Taka 100, calculated by averaging the end market price of the share and its net asset value.

The SEC directed the merchant bankers and stockbrokers to follow the new directive from tomorrow (Monday).

Earlier, investors were entitled margin loan amounting to the same value of their securities.

The commission also restricted margin loan facility to the new BO [beneficiary owner] account holders for 30 days of the opening of the accounts.

The latest decision on the margin loan came following the recommendation of the Parliamentary Standing Committee on Finance. The house committee at a meeting before Eid advised SEC to stop providing margin loan to check the unusual surge on the stock market.

SEC, however, lowered the ratio of margin loan instead of stopping the facility.

The commission earlier in September reset the margin loan calculation criteria to decrease the flow of fund to the capital market. But the market until today continued witnessing huge fund flow, taking the index to newer height at almost every trading sessions.

Stock market operators earlier suggested offloading shares from state-owned enterprises to simmer market, which became highly overvalued due mainly to the supply shortfall.

The government already initiated the process of offloading the SOEs shares.

DHAKA, Nov 21 (BSS)

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