Oman not to lift margin trading ban
Muscat, April 8, 2009
Oman has no plans to lift an eight year old ban on margin trading, squashing speculation that brokers would lend money to investors to boost the ailing bourse, a stock market official said on Wednesday.
Margin trading is the practice of buying shares using money borrowed from a broker, who keeps the entire holding as collateral on the loan.
If shares go up it can double the investor's profit, but can also double losses if stocks fall.
"At the moment, the ban on margin trading stays and there is no plan to allow it back," Yahya Al Jabri, executive president of the Capital Market Authority (CMA), told Reuters.
"We have made it clear then that lending is the job of the financial institutions and not brokerage firms," he said.
Brokers had speculated that the CMA was planning to re-introduce margin trading that was banned in 2001 to prop up the market, increasing liquidity and boosting shares.
Investors say that they face a credit crunch from financial institutions which cut back on lending.
"Credit is not as abundant as it used to be so I personally think margin trading should be allowed again," said investors Saif Al-Rahbi. -Reuters
