The members of Karachi Stock Exchange have demanded of the ministry of finance and SECP to do away with the Continuous Funding System (CFS) at the exchange as according to them it is the root cause of settlement crisis in the stock market.
Haji Ghani Haji Usman, a senior member of KSE told Business Recorder here on Wednesday that the members are sending a letter to Advisor to the Prime Minister on Finance Shaukat Tareen, Chairman Securities and Exchange Commission of Pakistan (SECP) Razi-ur-Rehman and the KSE board soon requesting them to take necessary steps in this regard.
He said that the majority of KSE members have come to the conclusion that CFS financing has historically been the root cause of settlement crisis in the stock market and it is a kind of parallel banking, which is exploitative and is a tool of manipulation.
"We therefore demand the CFS Mk-II, successor of CFS, COT and in-house badla being done away with, for good," he said and added that the deliverable futures should also be done away with as it adds to the settlement crisis.
He said that to cater for the appetite of investors/speculators the cash settled futures be made practicable by taking 7.5 percent margin in cash only. This should also have a daily settlement feature on cash basis. Any brokerage house not meeting the payment obligation be panellised by switching off its KATS and squaring up its outstanding position.
Haji Ghani Haji Usman said that as many as 41 KSE members have signed the recommendation letter while the other will signed it soon. He said that majority of members are in favour of this proposal. He was expecting that around 125 members would sign the proposal letter written to the ministry of finance, SECP and KSE board. He was optimistic that they will get a favourable response from the ministry of finance and SECP in this regard.