Reuters: Hong Kong to cap securities margin financing

HONG KONG, April 4 (Reuters) – Hong Kong’s financial markets watchdog plans to limit the amount brokers can lend against shares to five times their capital.

Margin financing is an important source of revenue particularly for the city’s small brokers, but last year the Securities and Futures Commission (SFC) said it was concerned the activity posed a risk to financial stability in the Asian financial hub.

At that time, the regulator proposed a series of measures, including capping securities lending at between two and five times the capital of the brokerage.

The SFC on Thursday issued the final version of the rules, which as well as imposing a cap on margin loans, require brokers to control their exposure to individual clients to avoid concentration risks, and strictly enforce margin calls.

The rules will take effect on Oct. 4.

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