As per the Securities and Exchange Commission of Pakistan (SECP) time-bound action plan for phasing out of carryover (badla) transactions (COT), announced in September 2004 and started from October 8, 2004, scrips are being phased out from the COT market, continuously, on a weekly basis. Karachi Stock Exchange (KSE) Managing Director Moin M. Fudda said that COT phasing out process is carrying out in smooth and efficient manner in accordance with the plan agreed between the SECP and the exchange.
To date, out of 29, 13 scrips have been withdrawn and the COT market will be completely phased out from the capital markets on June 3.
Scrips that have so far been withdrawn comprise, Southern Electric, BSJS Balance Fund, Picic Commercial Bank, Telecard, Faysal Bank, Union Bank, Engro Chemical, WorldCall, Dewan Salman, Picic Growth Fund, Fauji Fertilizer Company, Picic and Sui Southern Gas Company.
While scrips which would be withdrawn from now onwards till June 3, include Nishat Mills, effective February 18 and thereafter, on weekly basis, Lucky Cement, Sui Northern, Askari Commercial Bank, Muslim Commercial Bank, Maple Leaf Cement, ICI Pakistan, Fauji Fertilizer Bin Qasim, Bank of Punjab, Pakistan Telecommunication, Hub Power, National Bank, Pakistan Oilfields, D.G. Khan Cement, Oil and Gas Development Company and Pakistan State Oil.
From the commencement of COT phasing out plan, the Stock Futures Eligible Scrips are increased from 15 to 30, in order to provide a broad-based alternative leveraging mechanism to the market participants.
As envisaged earlier, Stock Futures - deliverable market is now becoming more popular among the investors and the turnover is progressively increasing, simultaneously with the gradual phasing out of COT.
Moin Fudda also said that margin trading and margin financing, a supplementary product to replace COT, has also been made available to the market participants/investors, whereby they could trade in the cash market (Ready Market) by pre-arranging financing from the banks.
He recalled the joint efforts made by the SECP, SBP, KSE and NCCPL, last year, to develop and implement the rules, regulations and procedures of margin trading and margin financing.
The SECP notified the Margin Trading Rules, 2004 in June 2004. The State Bank of Pakistan issued regulations for financing to brokers by banks/DFIs, in July 2004. Thereafter, to regulate the margin trading transactions on the exchange, the KSE finalised the regulations for margin trading, 2004 in November 2004, along with the list of securities eligible for margin trading and margin financing.
In December 2004, the National Clearing Company of Pakistan Limited (NCCPL) enhanced its existing Broker-to-Broker (BTB) module, to facilitate margin trading and margin financing transactions through National Clearing and Settlement System.
Moreover, presently NCCPL is developing a new and specialised module to facilitate the lending banks and financial institutions. Such module will be a more user-friendly, containing enhanced features and expected to be launched by the end of the first quarter of 2005.
Moin Fudda said that despite making such timely efforts, margin financing is yet to take-off, primarily due to the reason that the lending banks/institutions are not yet geared up.
He urged them to take the initiative and tap this avenue, having enormous potential. It is expected that very soon, the banks would come forward and play their due role and actively participate in the development and growth of this globally accepted and recognised avenue of leverage trading in the cash markets, Fudda said.-PR
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