Yesterday marked an important milestone as the governmental panel focusing on reforms in the capital market put forth its final suggestions concerning margin rules. This follows an initial draft of propositions which was prepared earlier in February this year and brought to the notice of the Bangladesh Securities and Exchange Commission (BSEC). An individual who represented the taskforce elaborated that the concluding suggestions didn’t divert significantly from the preliminary draft since no sweeping changes were proposed.
The finalised recommendations were generated after receiving and incorporating the inputs of various market associates and stakeholders. The broker community contributed by providing an independent group of suggestions that found itself in alignment with the recommendations of the taskforce. The taskforce member also revealed that the aggregate of these perspectives didn’t stir the final suggestions far away from the original draft.
He further added that the taskforce members had also conveyed their viewpoints regarding the proposed amendments. The responsibility now rests with the BSEC to crystallize and refine these amendments to the margin rules from 1999 and ensure their execution within the market.
The recommendations put forth, prescribes that margin loans should only be made accessible to investors with a minimum equity capital amounting to Tk 10 lakh and a proven track record of at least six months of hands-on experience in the secondary market.
The objective of these adjustments is to establish a more rigorous eligibility process, elevate risk management procedures, and bring about greater transparency in margin trading practices. These changes are a result of the concerted efforts to stabilize the capital market and insulate it from sporadic and excessive trading volatility.
The proposed reforms are considered to be instrumental in shielding investors from rampant speculation, thereby contributing to a more robust and sustainable marketplace. The taskforce has emphasized that a significant element of the reform would be a thorough reconfiguration of the eligible collateral.
According to the taskforce’s guidelines, the revised framework will sanction margin financing against cash reserves, listed stocks from category A, corporate bonds that are rated a minimum of BBB+, and government securities. They believe this will contribute to a secure and healthy investment environment.
However, the revamped criteria for eligibility will exclude any securities under legal embargo or those facing lock-in periods. The guidelines will strictly refrain from permitting highly speculative trading or illiquid stocks and would also not consider companies on the brink of insolvency.