SC: Margin financing flexibilities for capital market participants

The Securities Commission Malaysia (SC) has approved additional measures by Bursa Malaysia Berhad (Bursa Malaysia) to assist market participants in this volatile and challenging market environment.

Brokers may, at their discretion, not make margin calls or impose haircuts on any collateral and securities purchased and carried in margin accounts.

They are also empowered to exercise their discretion whether or not to impose force selling measures on clients.

Previously, brokers were required to automatically liquidate clients’ margin accounts if the equity in those accounts falls below 130 percent of the outstanding balance.

In addition, the SC has also approved a broader list of accepted collaterals for margin financing.

With this flexibility, brokers can now accept other collaterals, such as bonds, unit trusts, gold and immovable properties to maintain their clients’ margin accounts, and value these collaterals accordingly.

Datuk Syed Zaid Albar, Chairman of Securities Commission Malaysia said that the move will help brokers continue focusing on their business and assist their clients during this period of unprecedented volatility and uncertainty resulting from the broader market impact of Covid-19.

All the above, takes effect from 27 March – 30 September 2020, are subject to brokers meeting their own capital adequacy ratio and shareholder funds as required by Bursa Malaysia.

They are also expected to exercise discretion in accordance with their own credit risk policies.

Meanwhile, to facilitate compliance with the Movement Control Order (MCO), brokers, trading participants, clearing participants and authorised depository agents are encouraged to operate shorter counter service hours for their clients.

The SC also confirms that the capital market will continue to operate as usual, within normal trading hours, during the extended period of the MCO to 14 April 2020.

All licensed and registered capital market participants are expected to remain open and operating in line with the MCO objectives to curb the spread of Covid-19.

 

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