Suppose you invest Rs. 300,000 of your own capital and use broker financing of Rs. 700,000 to buy shares worth a total value of Rs. 1,000,000.

Under the regulations set by the Securities Board of Nepal (SEBON), margin trading facilities provided by stockbrokers are subject to two distinct regulatory caps:

1. Broker-Level Exposure Limit: A stockbroker can extend total margin facilities up to 5 times its certified net worth.
2. Individual Client Concentration Limit: To manage risk exposure, a single client—including associated/related individuals or entities—cannot receive more than 10% of the broker's total available margin facility.

Eligibility Criteria for Margin Trading Under SEBON’s Margin Trading Directive, 2082

Under Section 8(1), Chapter 3 of the Margin Trading Directive, 2082 issued by the Securities Board of Nepal (SEBON), a listed company must satisfy all of the following conditions to qualify for margin trading facilities:

1. Public Shareholding: Must have at least 2,500,000 (25 lakh) public shares listed on NEPSE, excluding promoter or locked-in shares.

2. Net Worth: Must maintain a net worth equal to or greater than its paid-up capital.

3. Profitability: Must have generated a net profit in at least 2 of the last 3 fiscal years.

4. Listing Tenure: At least 2 years must have elapsed since its initial public offering (IPO) listing on NEPSE.

NEPSE Eligible Companies Overview

Following these regulatory criteria, the Nepal Stock Exchange (NEPSE) published its updated list containing 123 eligible companies for margin trading.

Breakdown by Sector

Key Regulatory Requirements for Investors & Brokers

• Initial Margin: Investors must deposit a minimum initial margin of 30% of the total market value of the shares being purchased.

• Maintenance Margin: A minimum maintenance margin of 20% must be maintained; falling below this triggers a margin call.

Margin Trading in Nepal is a borrowing facility that allows investors to purchase more shares on the Nepal Stock Exchange (NEPSE) than they could buy with their cash balance.

Instead of taking a formal margin loan (margin lending) directly from commercial banks, the investor puts down a percentage of the purchase price, and a licensed stockbroker funds the remainder. The purchased shares act as collateral for the borrowed funds.

Simply put, it is trading with leverage—you use your own capital plus borrowed capital from your broker to purchase a larger quantity of shares than you could with your own cash alone.

Key Concepts & How It Works in NEPSE

• Margin Amount (Initial Deposit): Under Nepal Securities Board (SEBON) guidelines, brokers typically require an initial margin (often minimum 30%  in cash or acceptable collateral shares) before opening a margin trading account.

• Maintenance Margin: The minimum equity percentage you must maintain in your account. If the market falls and your equity dips below this threshold, you receive a Margin Call.

• Margin Call: A demand from your broker to deposit additional funds or collateral. If you fail to fulfill it, the broker has the legal right to sell your shares to recover the loan.

• Approved Securities List: You cannot buy any stock on margin. NEPSE periodically releases a list of margin-eligible stocks based on criteria such as company profitability, paid-up capital, continuous listing duration, and liquidity.

• Photocopy of citizenship
• Photocopy of Demat confirmation letter 
• One PP size Photo
• Photo and citizenship copy of guardian (in case of minor) 
• Photocopy of pan card for transactions above 5 lakhs 

• Photocopy of citizenship
• Photocopy of Demat confirmation letter 
• One PP size Photo
• Photo and citizenship copy of guardian (in case of minor) 
• Photocopy of pan card for transactions above 5 lakhs 

• Photocopy of citizenship
• Photocopy of Demat confirmation letter 
• One PP size Photo
• Photo and citizenship copy of guardian (in case of minor) 
• Photocopy of pan card for transactions above 5 lakhs