Margin trading services are set to expand in Nepal's secondary market as six additional broker companies have received the necessary regulatory clearance and are awaiting final approval from the Nepal Stock Exchange (NEPSE). Once approved, these brokers will be able to offer investors margin trading facilities, allowing them to purchase shares using borrowed funds.
The six brokerage firms include Capital Max Securities, Share Pro Securities, Kalash Stock Market, Machhapuchhre Securities, SPS Securities, and Sajilo Broker. These companies have already completed the required procedures with Nepal Rastra Bank (NRB) and are now awaiting NEPSE's final authorization before commencing operations.
Out of Nepal's 92 licensed brokerage firms, 31 brokers have already obtained permission to provide margin trading services. While some have already begun offering the facility, others are arranging funding from banks and financial institutions to expand their lending capacity. Since margin trading requires substantial capital, several brokers have initiated credit rating processes to secure bank financing. Capital Max, for instance, is seeking a Rs. 50 crore loan, while larger brokerage firms are preparing to raise financing worth billions of rupees.
Among existing providers, NASA Securities has already disbursed nearly Rs. 1 billion in margin loans and plans to expand its portfolio to around Rs. 3 billion. The company currently charges approximately 1% monthly interest on margin loans. The expansion of margin trading is expected to diversify brokers' revenue streams by adding interest income alongside traditional brokerage commissions. While the facility is expected to improve market liquidity and trading activity, analysts caution that margin trading also increases investment risk during market downturns, making prudent borrowing and effective risk management essential for investors.
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