In a bid to rejuvenate share trading on the Nairobi Securities Exchange (NSE), the Capital Markets Authority (CMA) is actively developing regulations for margin trading. Margin trading involves investing in shares using funds borrowed from a lender, typically a stock brokerage or investment bank.
Despite the NSE experiencing a prolonged period of low volatility and low stock valuations, the CMA sees an opportunity for investors to purchase stocks at discounted prices, including through margin trading. The authority believes that engaging in day trading and margin trading in this low-volatility market will stimulate overall market activity and enhance liquidity.
“The low volatility in the market provides opportunities for investors to engage in day trading and margin trading, which in turn, will boost overall market activity and enhance liquidity. CMA is in the process of developing margin trading regulations,” stated the CMA.
Day trading involves buying and selling stocks on the same day to capitalize on small price movements. In a typical margin trade, a trader borrows money from a brokerage firm by depositing funds as collateral for the loan. The trader is then required to make interest payments on the borrowed funds.
Margin trading increases investors’ buying power, enabling them to purchase a larger quantity of shares with the securities serving as additional collateral for the loan. Some markets even allow investors to borrow the equivalent of their cash deposit, effectively doubling their buying power.
However, margin trading comes with risks. Investors may lose more money than deposited into the margin account, necessitating additional funds or a forced sale of securities if the portfolio falls below a minimum set value.
Margin trading is expected to complement day trading on the NSE, which commenced in December 2021 and allows investors to buy and sell securities within the same trading day.
By Delino Gayweh
Serrari Financial Analyst
January 29, 2023
Article and News Disclaimer
The information provided on www.serrarigroup.com is for general informational purposes only. While we strive to keep the information up to date and accurate, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.
www.serrarigroup.com is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information on the website is provided on an "as-is" basis, with no guarantee of completeness, accuracy, timeliness, or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
In no event will www.serrarigroup.com be liable to you or anyone else for any decision made or action taken in reliance on the information provided on the website or for any consequential, special, or similar damages, even if advised of the possibility of such damages.
The articles, news, and information presented on www.serrarigroup.com reflect the opinions of the respective authors and contributors and do not necessarily represent the views of the website or its management. Any views or opinions expressed are solely those of the individual authors and do not represent the website's views or opinions as a whole.
The content on www.serrarigroup.com may include links to external websites, which are provided for convenience and informational purposes only. We have no control over the nature, content, and availability of those sites. The inclusion of any links does not necessarily imply a recommendation or endorsement of the views expressed within them.
Every effort is made to keep the website up and running smoothly. However, www.serrarigroup.com takes no responsibility for, and will not be liable for, the website being temporarily unavailable due to technical issues beyond our control.
Please note that laws, regulations, and information can change rapidly, and we advise you to conduct further research and seek professional advice when necessary.
By using www.serrarigroup.com, you agree to this disclaimer and its terms. If you do not agree with this disclaimer, please do not use the website.
www.serrarigroup.com, reserves the right to update, modify, or remove any part of this disclaimer without prior notice. It is your responsibility to review this disclaimer periodically for changes.
Serrari Group 2023
