CFS Mk-II to run from April 7

The Securities and Exchange Commission of Pakistan (SECP) has announced that the CFS Mk-II will run from April 7, 2008, parallel with the current CFS market. The SECP announced this after a meeting with Karachi Stock Exchange management, directors of KSE, NCCPL management, representatives from MUFAP, KSE brokers and officials of SECP.
The meeting was chaired by SECP Chairman Razi-ur-Rehman Khan here on Tuesday. The SECP also announced that new scrips will be added in CFS Mk-II, to completely replace current CFS in July 2008. On complete implementation of CFS MK-II, initial margins will be 100 percent securities where financing would remain at or below Rs 85 billion.
It was decided that the CFS Mk-II, with no cap, will be implemented from the announced date of April 7, while the current CFS will run for 41 securities till June 30, 2008, with the existing cap of Rs 55 billion.
The CFS Mk-II Market will have no cap and will be available on the eligible securities with effect from April 7, 2008. It was also decided that the current CFS will merge with CFS Mk-II Market with effect from July 1, 2008. Two categories were made for eligible securities for CFS Mk-II.
Category 'A' CFS Mk-II Eligible Securities comprises on Arif Habib Bank Limited, Habib Bank Limited, JS Bank Limited, Jahangir Siddiqui & Co, National Refinery Limited, PACE (Pak) Limited, Sitara Peroxide and United Bank Limited while Category "B" CFS Mk-II Eligible Securities is Meezan Bank, PICT and Tri-Pack Films.
It was decided that the eligibility criteria of scrips in CFS Mk-II securities will be reviewed by RSE and NCCPL jointly on May 1, 2008 and revised CFS Mk-II eligible securities will be modified accordingly with due notice to Market participants.
Regarding margining regime for financees in CFS Mk-II, it was decided that till July 1, 2008, initial margins in CFS Mk-II will be collected 100 percent in eligible securities or collateral.
AFTER JULY 1, 2008, INITIAL MARGINS WILL BE AS FOLLOWS:
-- 100 percent in eligible securities where financing in CFS Mk-II Market remains at or below Rs 85 billion.
-- 10 percent in cash and rest in eligible securities, where financing in CFS MK-II Market crosses Rs 85 billion but remains at or below Rs 100 billion.
-- 20 percent in cash and rest in eligible securities, where financing in CFS MR-Il Market crosses Rs 100 billion but remains at or below Rs 125 billion.
-- 35 percent in cash and rest in eligible securities where financing in CFS Mk-II Market crosses Rs 125 billion but remains at or below Rs 150 billion.
-- 50 percent in cash and rest in eligible securities, where financing in CFS Mk-II Market crosses Rs 150 billion.
Where any of the above limits is crossed and the respective cash requirement becomes applicable, it shall remain in force irrespective of the fact that the financing has reduced below that limit subsequently.
The Initial Margins by Financier in CFS Mk-II Initial margin for financiers shall be 100 percent in eligible securities and other acceptable collateral under the NCCPL Regulations from April 7, 2008 and July 01, 2008.
Mark to Market Losses and Special Margins for Financee and Mark to Market Losses of Financier in CFS Mk-II -- 100 percent in Cash (Bank Guarantees are also acceptable in lieu of margins under the present regulatory framework).
Infrastructure requirements - CFS Mk-II will be implemented on separate terminals for Authorised Financier and Financee. All market participants shall be required to install the requisite hardware and make it available to KSE and NCCPL for system installation by April 04, 2008.
INITIAL MARGIN IN CASH SETTLED FUTURES AND SIFC INITIAL MARGIN SHALL BE:
-- 100 percent eligible securities where open interest in the relevant market remains at or below Rs 10 billion.
-- 10 percent in cash and rest in eligible securities where open interest in the relevant market exceeds Rs 10 billion but remains at or below Rs 20 billion.
-- 20 percent in cash and rest in eligible securities where open interest in the relevant market exceeds Re. 20 billion but remains at or below Re 30 billion.
-- 35 percent in cash and rest in eligible securities where open interest in the relevant market exceeds Rs 30 billion but remains at or below Rs 35 billion.
-- 50 percent in cash and rest in eligible securities where open interest in the relevant market exceeds Re. 35 billion.
INITIAL MARGIN IN DELIVERABLE FUTURES MARKET INITIAL MARGIN SHALL BE:
-- 100 percent eligible securities where open interest in the relevant market remains at or below Re. 20 billion.
-- 20 percent in cash and rest in eligible securities where open interest in the relevant market exceeds Re. 20 billion but remains at or below Rs 30 billion,
-- 35 percent in cash and rest in eligible securities where open interest in the relevant market exceeds Re. 30 billion but remains at or below Re 35 billion.
-- 50 percent in cash and rest in eligible securities where open interest in the relevant market exceeds Rs 35 billion.
SPECIAL MARGIN IN DELIVERABLE FUTURES MARKET: Special margins shall be 50% in cash and rest in eligible securities; however, where open interest in Deliverable Futures Market crosses Rs 25 billion, special margins will be collected 100 percent in Cash.
The above amendments in the risk management regime for Deliverable Futures, Cash Settled Futures and SIFC Markets will be implemented with effect from the next applicable contract after getting necessary approvals from SECP.
It was agreed that release and rollover in CFS Mk-lI Market shall only be allowed in last 5 working days of the contract in CFS Mk-II Market. Unreleased financing shall be forced released on expiration of the maturity of 22 working days. Number of eligible securities in cash settled futures shall be increased to 15 securities at the earliest.
The Securities Eligible for CFS Market at KSE are Allied Bank Limited, Arif Habib Securities Limited, Adamjee Insurance Co Ltd, Askari Bank Limited, Azgard Nine Limited, Attock Petroleum Limited, Attock Refinery Limited, Bank Alfalah Ltd, Bank Al-Habib Ltd, Bank Of Punjab, Dewan Cement Limited, DG Khan Cement Co Ltd, EFU Gernal Insurance Limited, Engro Chemicals, Faysal Bank Limited.
Fauji cement Co Ltd, Fauji Fertiliser Bin Qasim Ltd, Fauji Fertiliser Co Ltd, Hub Power Company Limited, ICI Pakistan Limited, Indus Motor Company Ltd, Kot Addu Power Company, Lucky Cement Limited, MCB Bank Limited, National Bank Of Pakistan, Nishat (Chunia) Ltd.
NetSol Technologies Ltd, NIB Bank Limited, Nishat Mills Ltd, Oil & Gas Development Company Ltd, Pakistan Elektron Ltd, Packages Ltd, Pakistan Oilfield Ltd, Pakistan Petroleum Ltd, Pakistan Refinery Ltd, Pakistan State Oil, Pakistan Telecommunication Co, Soneri Bank Limited, Sui Northern Gas Pipeline Ltd, SSGC Sui Southern Gas Co Ltd, WTL Worldcall Telecom Ltd.