Margin trading rules cause concern
Margin trading rules cause concern
VNDirect Securities Co has been ordered by the State Securities Commission to cease providing new margin contracts within 60 days, exposing some ongoing concerns over current margin trading rules.
The brokerage was cited for three violations: failing to ensure that clients had deposited at least VND10 million (US$476) on account, as regulated in Ministry of Finance Circular No 74/2012/TT-BTC; failing to calculate the limit on margin loans based on each stock but instead basing the calculations on client accounts; and allowing clients to engage in margin trading on ineligible stocks.
VNDirect's chief investment officer, Pham Minh Huong, asserted that it was time to rethink the regulations governing margin trading.
"While the most important function of the stock market is to create liquidity, margin trading is not allowed on such high-demand stocks as Saigon Securities Inc (SSI) and Kim Long Securities (KLS) but only on some low-quality shares," Huong said.
She also argued that requiring investors to maintain a minimum of VND10 million in their accounts was unnecessary.
Huong said that securities companies knew best how to secure their own assets and those of their clients, and she suggested that brokerages be allowed to determine for themselves which stocks would be eligible for trading on margin.
While saying that it would consider amending some regulations, the commission ordered the halt to new margin contracts and told VNDirect to cease supporting the involvement of Vietnam FNM Investment Service Co Ltd with VNDirect's customers.
The brokerage was ordered to come up with measures to address its violations no later than November 22.
Huong said the two-month suspension would not fundamentally affect the company's performance. Margin loans accounted for only 20 per cent of its charter capital, and funds were abundant for other operations despite the current low liquidity of the stock market, she said.
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