The Central Depository Company (CDC) has planned a number of measures to expand its services to all segment of stakeholders in the financial sector and engineered securities lending and borrowing through CDS, share register function, and investment facilitation service.
CDC Chief Executive Officer Mohammad Hanif Jakhura, in its review for the preceding year, identified a number of measures going forward to broaden their presence in the financial sector of the country.
The objective of developing the securities borrowing and lending system (SBL) is to reduce the number of settlement failures in the market and minimise settlement risks to investors.
The CDC can play an active role in developing securities lending market in Pakistan. While attempting to develop a formal SBL market, relevant issues in the existing SBL markets such as transaction structures and settlement procedures, settlement risk management, taxation, legal and regulatory framework, accounting treatment, market access and information reporting are looked into with a view to developing and implementing a system that best serves the interest of all stakeholders.
THE IMPLEMENTATION OF THE SBL WOULD ACCRUE FOLLOWING BENEFITS: maximisation of return from investments that would otherwise lay idle, increase cash liquidity through investment of the cash collateral in the money market, promote settlement efficiency and lower transitional risk by eliminating changes of settlement failures and increase liquidity in the securities market thereby increasing the market efficiency.
The report added keeping in view the scope in share registrar services and considering CDC's position in the capital market of Pakistan, that is based on trust and goodwill and the fact that it can greatly add to the overall efficiency of the capital market. Introduction would be an innovative one in this area on the basis of its technical edge, it was decided to undertake this function.
In this regard, Object Clause of Company's Memorandum of Association has been amended and necessary feasibility has been done. Currently, business procedures are being drafted keeping in view the related process and practices. Commencement of this service is likely to start from the middle of this fiscal year.
The CDC has coined investment facilitation service. Gaining from its trusteeship operations, the company has decided to explore yet another business opportunity by acting as investment facilitator by undertaking function of distribution units of open-end mutual funds. Since the CDC is already planning to open branches to provide investor account services as well as to have its presence in all major cities in Pakistan, this service will go a long way in terms of making the branch operations feasible for the company.
Moreover, both the services would complement each other, as the profile of the clientele for both the services is practically identical. Furthermore, the system has been developed and regulations have been framed for induction of units of open-end mutual funds in the CDS, which would allow the clients to benefit from all these services from the window.
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