The Securities & Exchange Commission of Pakistan (SECP) has rejected the Karachi Stock Exchange (KSE)''s proposal to increase CFS level for the time being and has asked for recommendations with strong reasons. The management of the KSE along with member directors discussed the issue with Chairman, SECP, Raziur Rehman during a meeting held here on Saturday.
The KSE team proposed to enhance the CFS cap from existing Rs 55 billion to another higher level. "We discussed the issue with the Chairman SECP and proposed to enhance the CFS cap which is needed at the market", Shehzad Chamdia, member director, KSE told Business Recorder after the meeting.
"The chairman SECP asked us to submit recommendations in this regard with strong reasoning that why the enhancement in the CFS limit is needed from its existing level", he said.
"We will present our recommendations before the SECP within a week", Shahzad Chamdia said and added that the recommendations would be prepared on the basis of value, volume and capitalisation, which has increased significantly during the last few months. "We would compare the present position of the market with its previous levels during the last two to three months", he said.
The Karachi share market had touched its highest ever level and the total investment under CFS has reached near its upper level at Rs 54.4 billion. The investors were of the view that the upper limit of this mode of funding should be increased otherwise there would be liquidity crunch for investors very soon that might affect the market adversely.
Some other issues including institutional margins were also discussed in the meeting. It is worth mentioning here that the SECP also rejected the proposal for enhancing CFS limit earlier, when KSE, in a letter dated April 18, requested the regulator to increase the level of this mode of investment.
The SECP said that the CFS limit would be reviewed once the applicable percentage of exposure margins matures up to 100 percent. The Exchange implements other measures and the required reports are submitted on daily basis by the Exchange to enable the Commission to make a well-informed decision in this regard. The regulator made it clear that till such time, the CFS limit shall remain capped at the existing Rs 55 billion.