What are the controls of Margin Trading in Kuwaiti Stock Market?
The capital and stock market lawyers in RHR Law Firm respond to this question.
On 22nd April 2021, the Capital Markets Authority issued Resolution No. 53 of 2021, which included amendment of some provisions of Book Eleven (Dealing 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 decision added the following margin trading controls to Articles (8-18):
Margin trading regulations
The following controls are applied to margin trading:
- The maximum purchase limit for securities is equal to the total amount of cash and securities deposited by the client as initial margin plus the amount of financing granted by the margin trading service provider.
- If the client purchases securities in an amount less than the maximum purchase limit, the remaining amount may be used to purchase other securities in the margin trading account, as long as it does not affect the initial margin.
- If the value of the deposited funds in the Margin Trading Account exceeds the initial margin, the client may withdraw cash or transfer the funds to other accounts with the Margin Trading Service Provider.
4- The client may exchange all or part of the securities financed by margin with other securities financed by margin after receiving approval from the margin trading service provider, provided that this does not affect the maintenance margin and the market value of the purchased securities does not exceed the value of the sold securities.
- It is prohibited to use the margin trading account to subscribe to new issues of securities, notwithstanding the right to subscribe to increase the capital of the companies issuing securities that already exist in the margin trading account.
- If cash dividends or bonus shares are distributed, the service provider must add the profits and shares to the margin trading account.
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