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Virendra Verma

Mumbai , July 30

MARGIN trading, launched three months ago, is yet to find takers as its guidelines don't favour investors, according to market experts.

Banks are also not comfortable lending funds for margin trading, as they are uneasy lending to brokers.

Margin trading allows investors to purchase shares through borrowed funds.

As per Securities and Exchange Board of India (SEBI) guidelines, investors have to bring in 50 per cent of their funds while the rest can be borrowed.

The interest rate on this is market determined and differs from scrip to scrip.

Ms Deena Mehta, Director, Asit C. Mehta Investment Intermediaries, said: "Margin trading has not taken off as expected due to the various guidelines issues which are not favourable to brokers and there are also some legal issues."

She added that brokers are not allowed to pledge the shares bought on margin trading to banks as collateral to borrow funds from them.

In addition, the arbitration cases relating to margin trading cannot be taken up with stocks exchanges. This is also a deterrent for margin trading.

A top official of a domestic broking firm said, "The guidelines for margin trading are so strict that it is not feasible either for broker or client to do it."

Currently, a client has to bring in 50 per cent as margin money, which is very high. "Very few clients are coming forward for margin trading."

Till yesterday, financing of margin trading on the NSE has been to the tune of Rs 16.41 crore and on the BSE, just Rs 5.45 crore.

Financing is available for more than 100 scrips, but for just a few hundred or thousand shares.

A senior official of a public sector bank said: "The product (margin trading) is not customer-oriented. The regulators framed the scheme without taking into consideration the operational aspects."

Regulators and banks should prepare a scheme that is acceptable to the clients in the market, he added.

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