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Margin requirements of brokers nowTk5cr

Market operators believe move to boost stock trading

Sarwar A Chowdhury
Brokers’ margin requirements with bourses were increased to Tk 5 crore from Tk 1 crore yesterday. a move market operators believe will boost stock trading that has been experiencing bearish trend for the last one month.
The enhancement in margin requirement means that brokerage houses will be allowed to trade up to Tk 5 crore a day without any security money with the bourses.
The Securities and Exchange Commission (SEC) at a meeting yesterday approved the enhancement of the margin limit.
The Consultative Committee of the SEC recently recommended an increase in the margin limit of the brokerage houses. The recommendation was aimed at extending the trading activities of the brokerage houses as well as to create a liquidity surplus for the brokers.
According to the market operators, the regulator's decision will not only help the market to recover from the recent bearish trend, but will also help to flourish the businesses of the brokerage houses.
They also said the market is growing gradually, especially with many state-run entities offloading their shares on the market. So, the trade volume is also increasing, they said, adding that if the margin limit is not extended, the brokerage houses will face liquidity problems, as they will have to deposit huge margins with the stock exchanges.
“It's a pragmatic decision and now the business of the brokerage houses will be more flexible and easy," said Imtiyaz Husain, chairman and managing director of Imtiyaz Husain Securities.
Earlier the brokerage houses faced difficulties, as they had to deposit margins with the stock exchanges when the trade volume crossed Tk 1 crore, he
said.
Another chief of a brokerage house said they can now invest the surplus amount and that will push the trading volume on the stock market.
In the first week of the last month, the average turnover on the Dhaka Stock Exchange (DSE) was Tk 432.99 crore, which came down to Tk 214.24 crore in last week. Apart from turnover, the daily average transactions also came down to 1,20,00,899 shares in the last week, which was 2,66,24,679 shares in the first week of the last month.
After the meeting yesterday, SEC Executive Director Farhad Ahmed said the commission re-fixed the brokers' margin requirements with the stock exchanges at Tk 5 crore or four times of the paid up capital of a broker, whichever is lower.
He said the new margin structure will come into effect after the gazette notification.
At yesterday's meeting, the commission also approved the initial public offering (IPO) prospectus of Northern General Insurance.
Northern General will raise Tk 9 crore from the public through floating 9 lakh shares ofTk 100 each.
As of December 2007, the insurance company's earning per share was Tk 20.53, while
the net asset value per share wasTk 152.14.
Existing paid up capital of the company is Tk 6 crore, while the authorised capital is Tk25 crore.
Credit Rating Information and Services rated the company as 'BB+'.
sarwar@thedailystar.net