SEBI to permit margin trading and stock lending
By Our Markets Bureau | 08 Jan 2004
Mumbai:
SEBI has decided to introduce margin trading and stock
lending and borrowing system.
Speaking to press persons on Wednesday, the SEBI Chairman, Mr G.N. Bajpai, said that the decision was taken when the board met in Kolkata on Tuesday. A detailed notification regarding the modalities of the scheme will be issued shortly, he added.
Margin
trading allows investors to buy stock by paying a part
of the value with the rest being financed by the broker.
Such financing helps investors leverage their funds several
times.
In securities borrowing and lending systems, a player
in the market who has sold shares without holding securities
(short-selling) borrows securities from others and delivers
the shares to the buyer.
Under the new margin trading, a broker can borrow funds from banks and RBI-registered NBFCs and on-lend these funds to clients.
The
new system is different from the prevailing margin trading
norms where banks are allowed to lend only to brokers,
but brokers in turn cannot on-lend the funds to clients.Under
the proposed
system, only corporate brokers with minimum net worth
of Rs 3 crore can undertake such activities; they can
lend up to five times their net worth.
.jpg "RBI keeps repo rate unchanged as focus remains on inflation")
.jpg "Indian Oil, Panasonic team up for lithium-ion cell production in India")
