A meeting of the Securities and
Exchange Commission of Pakistan (SECP) headed by the Chairman, Commissioner and
other senior officials of SECP was held with the Board of Directors, Management
and senior members of the Karachi Stock Exchange. The meeting discussed
important capital market development matters and measures for enhancing
activity at the Exchange by supporting retail participation.
The apex and front line regulators reviewed various international best
practices for the overall growth of the market and deliberated upon areas of
investor protection, expansion of market outreach, new product development in
equity, debt and derivative segments, activation of leverage products for
improved liquidity, effective risk management and market monitoring and
surveillance etc.
While highlighting recent reforms in the market including revamping of
capital gain tax regime, introduction of revised Code of Corporate Governance
and demutualization of stock exchanges, the SECP Chairman emphasized upon the
Exchange to take expeditious steps to put in effect already agreed scheme of
arrangements for enhancing brokers’ capacity to execute business. Under the
said scheme each active broker will be allowed and amount of Rs. 50 million to
be utilized against bank guarantee from the Clearing House Protection Fund as
margins/collateral against their trades. It was however emphasized that in line
with international best practices risk management needs to be consolidated and
shifted to NCCPL with a settlement guarantee fund so as to support NCCPL to
function as a central counter party. A committee of the stock exchanges and
NCCPL was constituted to finalize necessary modalities for the same and submit
its recommendations to the SECP.
Further to support liquidity in the market, generate healthy activity
in leverage products i.e margin trading and securities lending and borrowing,
it was agreed that these products will
be reviewed in detail to identify and address issues hindering the
participation of investors.
Also, to revive investors’ confidence and affectively address claims
of investors pertaining to 2008 market situation, further enhancement of
contribution from IPF for each default and expulsion was recommended by the
SECP for consideration of the Exchange’s Board of Directors.
Other areas that were mutually agreed by the regulators include:
Taking appropriate measures to promote
intra-day/day trading, following principles adopted internationally, that will
assist in enhancing trading activity. Further, to address concerns of market
abuse the re-introduction of separate Odd lot Market and marketable lot size
for ready market was discussed and agreed upon.
The present restriction for broker-to-broker trading on the same
exchange was deliberated and it was agreed to be reviewed in detail to ensure
that no market abuse is encouraged while accommodating practical aspects for
facilitating market intermediaries.
With regard to inter-exchange
trades, it was agreed that such trades will be on the broker to broker (B to B) module, the risk
management of which will be looked after by NCCPL.
For
encouraging activity in the derivative segments the system in the Deliverable
Futures Contracts will provide for a special window to DFC holders in
overlapping period, whereby participants will be able to carryover their buy
and sale positions simultaneously.
The Chairman
SECP reassured the participants that the apex regulator will continue to work
in close coordination with the Exchanges and play a facilitators role for the
development of capital markets and enhancing investors’ confidence.
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