BC-7.2 BC-7.2 Limits and Trading Rules
BC-7.2.1
An investor may, through his relationship with any one individual participating bank under the System, invest a maximum of BD 200,000 in securities (i.e. BD 200,000 per investor/per individual participating bank, made up of BD 100,000 by way of the investor's own initial margin and BD 100,000 by way of financing from the relevant participating bank to that investor).
BC-7.2.2
An investor may, through approaching more than one bank under the System, invest a maximum of BD 500,000 in securities (i.e. BD 500,000 per investor/from all participating banks, made up of BD 250,000 by way of the investor's own initial margin with all participating banks and BD 250,000 by way of total financing from all participating banks to that investor.
BC-7.2.3
The amount of the margin facility made to an investor under the System shall be included as an exposure to that customer, and contribute towards the large exposures limit and the consumer finance limit for that person.
BC-7.2.4
The total amount of financing granted by an individual participating bank to all investors under the System shall not, at any time exceed 15% of that participating bank's capital base, such percentage to be reviewed by the BMA at its discretion from time to time.
BC-7.2.5
In relation to the aggregate limit under paragraph BC-7.2.2 above, the Agency will require participating banks to inform the Credit Risk Bureau of all facility limits approved to investors under the System from time to time. Participating banks must check with the CRB on the amount of facility limits outstanding under the System at any time to a particular investor.
Brokers
BC-7.2.6
Only those brokers approved by the BSE will be permitted to act as brokers for the System. Generally, brokers will only be approved if they (a) hold a "Class A" license from the BSE, and (b) meet the requirements set for the System from time to time by the BSE and the BMA.
Documentation
BC-7.2.7
Only standard-form documents (application forms and agreements) will be used for the System. Standard-form agreements, drafted and approved in advance by the BSE, will be entered into between the participating bank and the investor (in respect of financing), and between the participating bank and the investor and the broker (in respect of trading) and, as relevant, these agreements shall (amongst other things) confirm that:
a. The investor is borrowing or financing a stated amount from the participating bank for the purpose of taking part in the System;b. The investor will repay such stated amount, together with any interest or charges thereon, when due and in accordance with the agreement;c. The investor understands the risks involved in margin trading as well as the implications of the undertakings given by him;d. The participating bank can sell the securities bought through the System if the relevant margin is called and not met, without further formalities being required;e. The broker is liable for marking the securities to market on a daily (or more frequent) basis and for keeping the participating bank updated as to the participating bank's exposure to the investor;f. The investor can place orders with the broker for the purchase of securities up to the limit permitted by the agreement;g. Each party to the agreement in question shall abide by the duty of confidentiality imposed on him in relation to the matters set out in the agreement; andh. There is an overriding obligation on the parties thereto to comply with Bahrain law in general and, in particular, with the share-ownership restrictions applying to certain types of securities.Owner of the Securities bought using the System
BC-7.2.8
For ease of transfer and sale of the securities in the event that a margin is called by the participating bank but not met by the investor, the securities will be registered in the participating bank's name (for the account of the investor) and held by a custodian.
BC-7.2.9
Under paragraph BC-7.2.8 above: (a) the securities should not be considered as part of the bank's own assets for the purposes of determining ownership/control under Bahrain law, and (b) if the investor has discharged his obligations to the participating bank under the System and the securities have not been sold, the securities shall be transferred into the legal ownership of the investor.
Margin Percentage
BC-7.2.10
For equities listed on the BSE, an investor shall have the right to borrow a loan the value of which shall not exceed 50% of the total value of the funds being invested (i.e. 1:1). The BMA and the BSE shall coordinate in making any change to the margin percentages set for the System.
Margin Call Top-up
BC-7.2.11
The margin call top-up shall be 30% of the total value of the funds invested by an investor through a margin account with a participating bank. An investor shall settle a margin call on the settlement date (as determined by the BSE) by making a cash payment of such amount to the participating bank. Such cash payment may, at the investor's discretion and in whole or part, come from the sale of the securities bought through the System, or otherwise. Failure to meet such margin call will, however, give the participating bank the right to sell the securities bought through the System.
Margin Interest
BC-7.2.12
The participating bank shall charge a rate of interest or impose charges on the financing amount granted to the investor at a rate or on a basis to be determined by the participating bank. In the event that investor's margin account is in credit in excess of the margin applicable thereto, interest or profit shall be paid on the excess at a rate to be determined by the participating bank.
