News Details

New Regulations to Mitigate Margin Trading Risks


Proposals to rein in margin trading under consideration by the Financial Regulatory Authority (FRA) would introduce caps on how much stock investors can buy with borrowed funds. The new regulations — drafted by the FRA advisory committee — would curb how much a broker can lend to a single client to buy stock on margin. The measures could also include a cap on how much a single company’s shares can be exposed. The current proposals would not permit any single investor to purchase on margin more than 1% of a company’s market cap or 2% of shares on freefloat. A single company would also not be permitted to have over 15% of its outstanding shares held on margin, or 25% of its publicly-traded shares, whichever is higher. Some 90% of public companies currently don’t exceed those limits. (FRA Release, Enterprise)

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