SEC suspends brokers’ credit facility
Increases members' trade margin requirements
Star Business Report
Unnerved by continuous rally in stock prices, the Securities and Exchange Commission (SEC) yesterday decided to suspend credit extending facility by brokers to their clients to control excess liquidity in the market.The capital market watchdog also made decision to increase the members' margin requirements which is deposited to the concerned bourses in different slabs, a move which will force brokers to block their fund by depositing more in meeting trade margin. The decisions came at a meeting of the SEC as the indices of the bourses kept rising in recent months and the market witnessed fresh flow of funds. In the morning session trade, the Dhaka Stock Exchange (DSE) general index a| one stage crossed 2000 points mark later dropping back to close at 1994 points. The decisions have been taken through the amendment of margin rule 1999 and members' margin regulations, 2000 of the two bourses, said Farhad Ahmed, executive director of SEC, at a press briefing. As per the SEC decision, the members of the bourses will not be able to provide credit facility to their clients until further notification, he said. The decision to suspend the credit facility by brokers to their clients was taken as a temporary measure in the wake of bullish sentiment prevailing in the market which is creating a big difference between demand and supply of scrips, he added. Earlier, the brokerage houses could extend credit facility to their investors upto 67 percent on value of a securi|y. On the other hand, the regulators increased the members' margin requirements to the bourses reducing the free trading limit from Tk 1 crore to Tk 50 lakh. "From now on, the members will get a free trading limit upto Tk 50 lakh," the SEC executive director said. Every member will have to deposit the member's margin with the clearing house on the additional trade exposure at 20 percent for amount of Tk 50 lakh to Tk 1 crore, 30 percent for Tk 1 crore to Tk 2 crore, he added. For trade exposure of Tk 2 crore to Tk 5 crore, a brokerage house will have to deposit 50 percent to the bourse which acts as a clearing house for trade settlement in capital market, he said adding the rate will be 100 percent for the brokerage house's trade above Tk 5 crore on a single trading day.
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