The State Securities Commission issued its long-awaited margin trading guidlines on August 30, regulations which will officially enable brokerages to begin offering this service to investors.
Under the new regulations, investors must deposit at least 60 percent of the total amount that they are initially borrowing from the brokerage, or a minimum of VND10 million (US$480), and they must maintain a margin rate of no less than 40 percent during the loan period.
In principle, a share is tradeable on margin it it has been listed for at least six months, the firm has no accumulated losses, and the listing has not been suspended. Securities firms must disclose the list of eligible shares to investors.
An Phat Securities Co general director Tran Thien Ha said the new regulations were clearer and easier to apply than those in a previously circulated draft. In particular, it now made all securities companies, except those under regulatory control or subject to licence revocation, eligible to provide the service if they satisfy technical infrastructure and staffing requirements.
"Approval of margin trading will not only improve market volume, which is essential in the current context of a prolonged downtrend, but also help increase the financial transparency of securities companies," Ha said.
Brokerage houses must ensure a financial safety ratio (a ratio of total usable capital over total liabilities) of no less than 150 percent for three consecutive months before providing the margin trading service, as well as a debt over equity ratio of no more than six times and accumulated losses equal to no more than 50 percent of charter capital. Securities firms will not be able to lend over 200 percent of their equity, and their lending to a single investor will not be able to exceed 3 percent of their equity. They will also not be able to extend an amount on margin in excess of 10 percent of their equity on a single stock.
According to the recent data compiled from 98 brokerages by the financial website vietstock.vn, an additional 67.5 trillion VND (3.25 billion USD) could be injected into the stock market once securities firms begin offering the margin service./.
Under the new regulations, investors must deposit at least 60 percent of the total amount that they are initially borrowing from the brokerage, or a minimum of VND10 million (US$480), and they must maintain a margin rate of no less than 40 percent during the loan period.
In principle, a share is tradeable on margin it it has been listed for at least six months, the firm has no accumulated losses, and the listing has not been suspended. Securities firms must disclose the list of eligible shares to investors.
An Phat Securities Co general director Tran Thien Ha said the new regulations were clearer and easier to apply than those in a previously circulated draft. In particular, it now made all securities companies, except those under regulatory control or subject to licence revocation, eligible to provide the service if they satisfy technical infrastructure and staffing requirements.
"Approval of margin trading will not only improve market volume, which is essential in the current context of a prolonged downtrend, but also help increase the financial transparency of securities companies," Ha said.
Brokerage houses must ensure a financial safety ratio (a ratio of total usable capital over total liabilities) of no less than 150 percent for three consecutive months before providing the margin trading service, as well as a debt over equity ratio of no more than six times and accumulated losses equal to no more than 50 percent of charter capital. Securities firms will not be able to lend over 200 percent of their equity, and their lending to a single investor will not be able to exceed 3 percent of their equity. They will also not be able to extend an amount on margin in excess of 10 percent of their equity on a single stock.
According to the recent data compiled from 98 brokerages by the financial website vietstock.vn, an additional 67.5 trillion VND (3.25 billion USD) could be injected into the stock market once securities firms begin offering the margin service./.
