KSE seeks lifting of ban on NDM transactions

Calling for lifting of ban on Negotiated Dealing Market (NDM) transactions, the Karachi Stock Exchange (KSE) has asked the Securities and Exchange Commission of Pakistan (SECP to take regulatory measures instead of imposing a ban on the whole system. Sources told Business Recorder on Thursday that the KSE board of directors in its recent meeting had discussed the NDM issue in detail and decided to request the SECP for proper management of the NDM instead of ban on the whole system.
KSE introduced the NDM system from November 1, 2010 for reporting of all off-exchange transactions on real-time basis. However, the regulators banned share trading on bourses under the NDM where the stock brokers were found to have been misusing the securities of their clients for personal gains.
The SECP imposed a restriction on the NDM transactions on intra-brokers transfer of securities from house account to sub-account, sub-account to house-account and between two sub-accounts. In the board meeting, Nadeem Naqvi, Managing Director (MD) KSE, was of the opinion that there should not be any restriction on the transactions having two sub-accounts held within one brokerage house, as the same might lead to operational challenges and an outright increase in the number of delivery failures of small quantities.
"NDM transactions up to a quantity of 1000 shares will help avert the most widely rampant delivery failure, as the broker is able to arrange delivery through a client which has sub-account with the same broker," the sources quoted his as saying. Naqvi also said that there was also no harm in allowing NDM on T+0 basis, as the same acts as shock absorbers for the market emanated from delivery failures of small quantities.
The market participants are hoping to see inter-exchange NDM. Banning NDM transaction between two clients having sub-account with the same broker is without logic. The market participants believe that NDM is being banned just because the regulators are unable to take regulatory measures.
"The regulators will not gain any material benefit by restricting client-to-client deals, as there are certain other ways to turn on the transactions," investors said. They called for a proper check and balance mechanism to protect the investors' interest. "The ban on NDM has badly affected the investors. Unnecessary restrictions which adversely affect the market volume should not be imposed," Salman Naqvi, an analyst at Aba Ali Habib Securities said.