Exclusive | Brokers warn proposed cap on margin lending could reduce trading turnover and even threaten industry’s survival
Hong Kong’s markets regulator wants to limit the total amount brokers can lend to lessen risk, but brokers warn it would reduce trading turnover and threaten the industry’s survival.
Hong Kong’s leading stockbrokers have told the city’s market watchdog they remain strongly opposed to proposed curbs on margin lending, maintaining they would reduce trading turnover and could threaten the industry’s survival. But they say they are willing to compromise.
Christopher Cheung Wah-fung – the veteran stockbroker who is also a lawmaker representing the financial services sector – said, however, the city’s leading firms would accept a small cap on margin lending at the lower end of proposed restrictions now under consideration, if forced.
He met Securities and Futures Commission chairman Carlson Tong Ka-shing and other senior officials last week to hammer out the issues involved.
“If the SFC insists there should be a cap, it should be set at five times or more than the capital of the brokerage firm,” Cheung told South China Morning Post.
The regulator is considering a cap somewhere between two and five times of capital held by the brokers. A period of comment ends next month, and the watchdog will make its announcement later on.
Margin lending refers to using borrowed funds from a broker to trade equities or other financial assets, which forms the collateral for the loan from the broker.