The Securities and Exchange Commission (SEC)’s new directives on margin trading have triggered big business for some banks and brokering houses, the Business Times learns. “There are a few who have started this such as Pan Asia and Nations Trust, while others are moving aggressively towards this. It can become another revenue generator for the banks - especially at a time where they are struggling to lend,” an analyst said, adding that it’s a great opportunity.
Commercial Bank formally announced its margin trading early this week while Sampath Bank and NDB have also started this facility. Capital Trust Securities has started granting margin trading facilities to their clients up to 50% of their portfolio values, the company said. Other brokers are also gearing up for this. “Most broking houses will set up their own margin providing companies (obtaining fresh licenses) by December 31st. Interest income has also become a lucrative source of income for some broking houses. I doubt whether they will give it up that easily,” the analyst said.
Margin trading is where investors are allowed to trade from their specialised bank account of upto 50% of the available funds.
The SEC has directed stockbrokers to extend credit beyond the T+3 (trading day+ three market days) only through a margin trading account, from January 1. Day traders (from next year) will need to sign a risk disclosure statement and open a day trading account with a margin assigned which will show the trader’s day trading purchasing power.
The SEC has granted time till June 31, 2011 to stockbrokers to clear their credit accounts with investors. |
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