Karachi Stock Exchange (KSE) on Friday announced that Continuous Funding System (CFS) would be executed simultaneously with the regular market and the new system would commence from Monday (December 19).
The CFS would start on the real time basis from Monday from present practice of raising funds after the closure of the normal trading session from Monday to Friday.
According to experts, the present system would soften the rates and would ease the raising of funds by the investors. In this regard, the members of KSE had been asked to keep their offices open on Friday, December 16, 2005 till 10:00 pm and on Saturday December 17, 2005 from 10:00 am to 4:00 pm, a notice of KSE stated on Friday.
In order to test new version of Trade Work Stations (TWS), the IT division of the exchange would arrange a mock session on Saturday. The CFS had replaced the Badla financing in July and the maximum amount for the purpose of CFS was capped at Rs 25 billion. Presently, 14 companies are trading under CFS in accordance with the criteria laid down by the board.
The list of these approved securities is subjected to review by the exchange after every six months. For the purpose of ensuring risk management, the CFS market is separate from the T+3 market and the purchases of a security by financier under CFS is not netted against its sale in the same security in T+3 market.
While the rates of margin are determined by the board and the margin is increased in proportion to the increase in KSE-100 index. The financier keeps the CFS financed securities in a separate account maintained with the Central Depository Company (CDC) in order to ensure that these securities are not used for loaning against blank and short selling.
Every broker maintains his leverage position in respect of CFS and other derivatives not exceeding 15 times of his Net Capital Balance. According to a trader at KSE, the real time CFS from Monday might force a dull session as the capped amount is not likely to last till end of the session and advised caution in this regard.
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