(MENAFN- The Peninsula) DOHA: Extensive rules have been put in place for margin trading activities to be conducted on the Qatari bourse, Qatar Exchange (QE).
The regulator of the capital markets will issue licences to financial services companies to carry out margin trading for their customers. Whether brokerage firms operating on the stock market would be issued the license to carry out margin trading for their customers is not known. Requests for licensing are to be made to the regulator, the Qatar Financial Markets Authority (QFMA) which, according to the law, will get back to the applicant within 90 days.
Each licensed company will be required to have a written agreement signed with the customer to operate his or her margin trading account. No one will be permitted to have more than one margin trading account, according to article 8 of the law that was issued yesterday.
Account holders will not have the right to subscribe to initial public offerings (IPOs) through their margin trading accounts. They could only trade in stocks. The company will not be allowed to provide credit to a margin trading customer for more than 50 percent of the purchase value of a stock. And margin funding amount provided to a single customer should in no way exceed 10 percent of the net assets of the company.
According to the law, the requirement for maintenance margin (securities that are bought and kept as collateral by the company) will be 30 percent of the market value of the securities bought. If the value dips due to market volatilities, the company will issue a margin call and the account holder will have to add more cash to his account to maintain the required percentage.
The licensed companies will need to provide details of their margin trading funding activities to the QFMA on a weekly basis. Warranty deposits to be made by accountholders will have to be made in cash and not in securities.
The rules also specify circumstances in which companies can freeze margin accounts.
The law empowers the QFMA to initiate punitive action against companies for violating rules.
Another law issued by the board of directors of the QFMA was about external auditors and financial evaluators for listed companies and other companies under the jurisdiction of the QFMA. The auditors, with no less than five years of working experience, will be required to be licensed by the Ministry of Economy and Commerce and registered with the QFMA.
Their technical employees will also need to be registered with the QFMA, said the rules.
H E Sheikh Abdullah bin Saoud Al Thani, governor of Qatar Central Bank and chairman of the Board of Directors of the QFMA, issued the above legislations, a press statement said yesterday.
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