SEC, NSE, CBN, others review margin trading
SEC, NSE, CBN, others review margin trading
Apparently worried by the continuous drop in share prices of quoted companies on the Nigerian Stock Exchange (NSE), the Securities and Exchange Commission (SEC) has constituted a committee charged with the responsibility of working out modalities for investing with margin funds by stockbroking firms and investors.
The committee, according to SEC, has membership drawn from the Commission, the Nigerian Stock Exchange, Central Bank of Nigeria (CBN) and the Nigerian Deposit Insurance Corporation (NDIC). Mr. Lanre Oloyi, spokesman for SEC, disclosed that the committee was mandated to work out modalities for effective implementation of margin trading in the Capital Market which, according to the Commission, is practised in all capital markets worldwide.
In Capital Market parlance, margin trading or funding is a system whereby stockbroking firms, corporate organisations and individuals borrow money from bankers to invest in stocks, after which they sell, pay back and make their own money at the appropriate time. To market watchers, the practice has helped the stock market to grow, especially in recent times when its fundamentals grew tremendously, before the CBN recently stopped it, which made the market to crash significantly.
For instance, at the close of trading last week, the All-Share Index of the NSE fell by 4.57 per cent to close at 56,23.02 points, while market capitalisation closed lower at N10.95 trillion. The Commission said the modalities would soon be released, noting that margin trading was not applicable in only Nigeria but was a worldwide phenomenon.
According to Oloyi, the Commission is confident that the Stock Market indices would rise soon when more blue chip companies quoted on the NSE present their scorecards. The Commission also assured investors that the Capital Market remained a solid and safe investment haven for both local and international investors.
Tags: News, stockexchange
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donne4real | June 10, 2008