The Financial Regulatory Authority (FRA) would introduce caps on how much stock investors can buy with borrowed funds in order to rein in margin trading, the regulator said (pdf) yesterday.
the new regulations — drafted by the FRA’s advisory committee (pdf) — 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, FRA Deputy Chairman Islam Azzam said following a meeting between the advisory body, EGX representatives, and clearinghouse MCDR.
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, according to Azzam.
