KARACHI-(Dow Jones)- Pakistan's National Clearing Company has served final notices to four securities firms after they failed to pay dues incurred when the benchmark KSE-100 index plunged 27% from Dec. 15 to Dec.24, an official of the agency said Tuesday.
"These securities firms have to clear around PKR160 million in a day, failure to do so will result in selling their membership card to clear dues and declaring them default members," the official, who asked not to be named, said.
The National Clearing Company provides clearing and settlement services to all three stock exchanges in the country.
Of the four companies, three are members of the Karachi Stock Exchange and one belongs to the Lahore Stock Exchange, he said.
Last month, a committee comprising members of the Mutual Funds Association of Pakistan, directors of the Karachi Stock Exchange and officials of the Securities Exchange Commission of Pakistan and the National Clearing Company of Pakistan was constituted by Shaukat Tarin, economic advisor to Prime Minister Yusuf Raza Gilani, to resolve the issue of shares being held under the continuous funding system commonly known as "badla".
Stock brokers, who bought shares on borrowed money, facing a cash crunch were given two options: Borrow PKR50 million each from the Investors Protection Fund to free the blocked shares or sell them to financial institutions at a 12.5% discount to the Dec. 24, 2008 close. The four companies didn't opt for either option.
The Investors Protection Fund is run by the Karachi Stock Exchange.
The Karachi Stock Exchange had on Aug. 27 imposed a floor on the KSE-100 index at 9144 points as political uncertainty and weakening economic fundamentals sparked heavy selling of shares.
The KSE-100 index has declined 35% from Dec. 15, when the index floor was removed, to Jan. 5. ( By Haris Zamir, Source: Dowjones Business News)
"These securities firms have to clear around PKR160 million in a day, failure to do so will result in selling their membership card to clear dues and declaring them default members," the official, who asked not to be named, said.
The National Clearing Company provides clearing and settlement services to all three stock exchanges in the country.
Of the four companies, three are members of the Karachi Stock Exchange and one belongs to the Lahore Stock Exchange, he said.
Last month, a committee comprising members of the Mutual Funds Association of Pakistan, directors of the Karachi Stock Exchange and officials of the Securities Exchange Commission of Pakistan and the National Clearing Company of Pakistan was constituted by Shaukat Tarin, economic advisor to Prime Minister Yusuf Raza Gilani, to resolve the issue of shares being held under the continuous funding system commonly known as "badla".
Stock brokers, who bought shares on borrowed money, facing a cash crunch were given two options: Borrow PKR50 million each from the Investors Protection Fund to free the blocked shares or sell them to financial institutions at a 12.5% discount to the Dec. 24, 2008 close. The four companies didn't opt for either option.
The Investors Protection Fund is run by the Karachi Stock Exchange.
The Karachi Stock Exchange had on Aug. 27 imposed a floor on the KSE-100 index at 9144 points as political uncertainty and weakening economic fundamentals sparked heavy selling of shares.
The KSE-100 index has declined 35% from Dec. 15, when the index floor was removed, to Jan. 5. ( By Haris Zamir, Source: Dowjones Business News)
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