What are Competencies of Risk Management related to Margin Trading Service?

In accordance with the executive regulations of the law establishing the Capital Markets Authority and regulating securities activity, the capital and stock market lawyers in RHR Law Firm respond to this question.

On 22^nd April  2021, the Capital Markets Authority issued Resolution No. 53 of 2021, which included amending some provisions of Book Eleven (trading in Securities) of the Executive Regulations of the Law Establishing the Capital Markets Authority and Regulating Securities Activity pertaining to the margin trading service in the Executive Regulations of the Law Establishing the Capital Markets Authority and Regulating Securities Activity. The Margin Trading Service Provider shall form a risk committee specialized in managing the risks associated with the provision of Margin Trading Service, in particular, following up on the Margin Trading Service Provider’s following obligations:

1. Follow the capital adequacy instructions in Book Seventeen of the Executive Regulations of the Capital Markets Authority and Regulation of Securities Activities.
2. The funds used to finance margin trading for a single security for all clients must not exceed 25% of the total funds allocated to the margin trading service.
3. Margin financing amounts granted to a single client shall not exceed 10% of the total funds allocated by the Margin Trading Service Provider for margin trading.
4. The initial margin must be at least 50% of the market value of the securities being financed on margin. Within the Margin Trading Agreement, the Service Provider may include a higher percentage of the Initial Margin.
5. The maintenance margin shall not be less than 25% of the market value of the securities in the Margin Trading Account at any time after the transaction’s date. Within the Margin Trading Agreement, the Service Provider may specify a higher Maintenance Margin percentage.
6. When determining the initial and maintenance margins, all clients must be treated equally.
7. Submit weekly reports to the Capital Markets Authority on the percentages specified in items (2), (3), (4), and (5), as well as any other requirements imposed by the Authority.

8. Submit weekly reports to the Central Bank of Kuwait on the volume of credit extended to clients.

The margin trading service provider may establish a list of securities that may be traded on margin and may amend this list from time to time after informing clients. Securities that are not on this list may be included.

If you are looking for a Kuwaiti law firm that specializes in providing legal services to the securities, capital and stock market activities, you can count on us at Taqneen, Law Firm and Legal Consultations.

To book an appointment or request legal advice about the duties of securities companies in the optimal implementation of clients’ orders, we are pleased to receive your inquiries at (info@Taqneen.com).