The Karachi Stock Exchange (KSE) on Monday implemented ''Client Level Netting'' (CLN) regime in May Deliverable Futures Contracts, after refusal of further extension by the Securities and Exchange Commission of Pakistan (SECP).
The SECP in its letter dated April 21, 2007 said that CLN regime should be implemented from May Deliverables Futures Contracts, and no further extension would be granted in this respect.
Referring to KSE letter dated April 18, 2007 requesting extension in the implementation of Client level Netting (CLN) regime in the Deliverables Futures Market, the regulator said that under the New Risk Management Regime the CLN in the Deliverables Futures Contracts was mutually agreed to be implemented with effect from February 1, 2007. However, due to non-availability of hardware, at the request of the Exchange, the Commission, while taking a considerate view, granted extension in CLN implementation till the beginning of April Deliverables Futures Contracts.
"Subsequently, the Commission had granted another extension in the implementation of CLN in Deliverables Futures Market vide its letter dated March 19, 2007, for a period of 30 days on request of the Exchange, made in its letter dated March 19, 2007", the letter said.
The Exchange had requested this extension on the grounds that the implementation of the margining system of Financial Institutions (FIs) had been delayed, which was due to be implemented before the beginning of April Deliverables Futures Contracts. The Exchange, in this letter, also committed to get the FIs margining system implemented within 30 days, ie, before the beginning of May Deliverables Futures Contracts.
KSE, in its April 18 letter, had requested for further extension in implementation of CLN in Deliverables Futures Market, citing reason that FIs margining system had not been implemented.
The SECP was of the view that the KSE, in collaboration with NCCFL, should expedite the process of implementation of FIs margining system at the earliest. In view of the above, the CLN should be implemented with effect from May Deliverables Futures Contracts, and no further extension would be granted in this respect, SECP said.