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Jakarta Post
The Jakarta Post
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Rule on margin trading in Indonesia to be eased

  • Anton Hermansyah

    The Jakarta Post

Jakarta | Wed, January 20, 2016 | 08:22 pm
Rule on margin trading in Indonesia to be eased Margin trading effect: Investors talk to each other as they check stock prices at a securities firm in Wuhan, in central China's Hubei province. Shanghai shares on July 3 extended their plunges, ending the morning session down more than 3 percent pummeled by profit-taking and margin traders calling in their bets. (AFP)

Margin trading effect: Investors talk to each other as they check stock prices at a securities firm in Wuhan, in central China's Hubei province. Shanghai shares on July 3 extended their plunges, ending the morning session down more than 3 percent pummeled by profit-taking and margin traders calling in their bets. (AFP)

The Indonesia Stock Exchange (IDX) has announced that there will be a drastic change in margin trading in which more flexibility will be given to stock brokerage firms with higher working capital to facilitate investors in buying any stocks under a specialized trading scheme.

Currently, only securities with net adjusted working capital (MKBD) of more than RP 5 billion can facilitate such trade, in which investors borrow money from the broker to purchase particular stocks listed on the bourse.

The IDX will classify brokerage houses according to requirements in the new rule. The higher a brokerage'€™s working capital, the more freedom it will have in choosing stocks for its clients or investors in margin trading, said IDX director Hamdi Hassyarbaini on Tuesday.

"Securities companies with MKBD Rp 25 billion to Rp 50 billion will be prohibited from facilitating margin trading, those with Rp 50 billion to Rp 250 billion MKBD can do it but will be limited in stock choice and those with MKBD higher than Rp 250 billion will be free to choose any stocks," he said in Jakarta.

Regarding market volatility risk due to the eased rule on margin trading, Hamdi said he believed that securities companies would prudently analyze and choose stocks that were beneficial to their investors and protect financial safety.

Despite the risk of causing the stock market to crash, margin trading enables investors to increase gains by buying a larger volume of profitable stocks in spite of limited cash. It also boosts liquidity as transaction frequency and volume increase.

'€œEasing of the rule is aimed at increasing IDX transactions,'€ said Hamdi.

According to a 1997 Financial Service Authority (OJK) rule, margin traders are required to have minimum net assets of Rp 1 billion, with an annual income of at least Rp 200 million. (ags)

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