The Qatar Stock Exchange (QSE) has revised down the initial margins to 50% from the earlier stipulated 60%, a move that ought to enhance the liquidity and market attractiveness.
"As part of the QSE's efforts to provide the best services to investors in line with international best practices, the initial margin in the margin trading rules has been amended to 50% instead of 60%," the bourse chief executive Rashid bin Ali al-Mansoori said in a tweet.
This amendment would (help in) increasing the liquidity and attractiveness of the market, he said.
The initial margin is the allowed amounts of money or securities deposited by the client in the margin trading account at the financial services company in accordance with the percentage determined in the margin trading pact in relation to the securities' market value to be traded via margin trading before the purchase process.
The reduction in the initial margin would further increase the leverage, implying higher purchasing power for average investors, market sources said, adding it would also help in increasing trade volume and value.
At present, the Group Securities and Commercial Bank Financial Services have launched margin trading services, while other intermediaries are also planning to launch in due course.
As of now, margin trading is allowed on more than 40 of the 48 stocks and the two exchange traded funds, sponsored by Masraf Al Rayan and Doha Bank.
The securities on which margin trading allowed include Industries Qatar, QNB, Ooredoo, Qamco, Aamal Company, al Khaleej Takaful, Barwa, Baladna, Qatar Electricity and Water, Commercial Bank, Qatar First Bank, Doha Bank, Dlala, Woqod, Qatari German medical Devices, Doha Insurance, Nakilat, Ezdan, Qatar Islamic Bank, Gulf International Services, Qatari Investors Group, Gulf Warehousing, QIIB, Investment Holding Group, Qatar Industrial Manufacturing, Inma Holding Group, Qatar Islamic Insurance, Medicare Group, Milaha, Qatar National Cement, Mesaieed Petrochemical Holding, Qatar Oman Investment, Salam International Investment, Mazaya Qatar, United Development Company, Widam Food and Vodafone Qatar.
The margin trading is transaction or transactions, whereby a financial services company pays a percentage of the securities' market value purchased for its client pursuant to the agreement governing the relation between them.
The QFMA or Qatar Financial Market Authority had issued margin trading rules on September 10, 2014.
The customers would have to open a new margin trading account with the brokerage firm. As per the QFMA rules, it is not permissible to open more than one margin trading account per person at more than one financial services company.
The margin trading account is used to deal in securities traded in the market, and must not be used for subscription in new securities’ issuances, as per the guidelines of the financial market regulator.
Prior to the issuance of the margin trading rules, margin trading was only mentioned as a regulated activity under Law No. 8 of 2012 (the QFMA Law) among other activities listed in the definition of ‘financial services’.