BSEC allows investors to get 100pc margin loans against deposits

A file photo shows the headquarters of the Bangladesh Securities and Exchange Commission in the capital Dhaka. Bangladesh’s Securities and Exchange Commission on Sunday allowed brokerage houses and merchant banks to increase margin lending facilities to their clients to 100% of clients’ deposit for any listed company. — New Age Photo

Bangladesh’s Securities and Exchange Commission on Sunday allowed brokerage houses and merchant banks to increase margin lending facilities to their clients to 100% of clients’ deposit for any listed company.

The BSEC issued a directive in this regard the same day.

In accordance with the BSEC Directive, brokerage firms and merchant banks may extend the maximum limit of credit facilities to their approved clients on a basis of 1:1 or 100% of the clients’ margin for all individual shares having a price-to-earnings ratio of up to 40 per cent under the 1999 Margin Rules.

This means that investors would get the maximum of Tk 100 in margin loans against their deposits of Tk 100 for any margin business.

The BSEC made the decision after observing a continued fall in share prices in recent weeks which raised fears that brokerage firms could trigger a ‘forced sale’ on customers’ margin loan accounts if the drop breached the limit. .

The DSEX, the key index of the Dhaka Stock Exchange, lost 1.84% or 115.56 points to close at 6,142.68 points on Sunday. The DSEX has lost 555 points in the last eight sessions.

On November 15, 2021, the BSEC removed indexed margin lending facilities and allowed stockbrokers and merchant banks to provide a maximum of 80% of investors’ deposits as margin loans.

The directive repealed the previous directive issued on April 4, 2021, in which it stated that clients would obtain a maximum of 80% of their deposits in the form of margin loans if the DSEX index remained below 7,000 points and 50% of their margin deposits. loans if the index crossed 7,000 points.

Earlier on September 21, 2020, the BSEC introduced the indexed margin lending facilities in which it said that clients would get a maximum of 25% of their deposits in margin loans if the DSEX index crossed 6000 points and 100 % of their deposits in the form of margin loans if the index fell below 4,000 points.

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