KARACHI: In a move to increase trading activities and to attract more retail investors' participation, the Securities and Exchange Commission of Pakistan (SECP) has allowed 50 percent initial margins in eligible securities and remaining 50 percent in cash in the Deliverable Futures Contract market.
Earlier, 100 percent initial margins were required in cash, and securities were not allowed to accept as margins, in the Deliverable Futures Contract market. Some key decisions were taken in a joint meeting held here on Sunday between the SECP and Karachi Stock Exchange (KSE). The prevailing market situation and possible measures to address issued faced by the market, in particular persistent low trading volumes and lack of retail investors' participation, were discussed in the meeting. The meeting was chaired by the Chairman of SECP, Muhammad Ali, and was attended by Chairman of KSE Munir Kamal, member directors of the exchange, senior market participants and senior management of SECP and the stock exchange.
A joint statement was issued by SECP and KSE which said that the meeting discussed various developmental areas, including KSE's proposal for amendments in Deliverable Futures Market (DFM) and Margin Trading System (MTS).
The measures agreed upon for the Deliverable Futures Contract market included initial margins to be collected 50 percent in eligible securities and 50 percent in cash. The Mandatory Basic Deposit requirement to take part in DFM has been withdrawn. A voluntary "Roll-over Facility" shall be allowed for DFM via a special window to be devised and provided by the Exchange for the purpose of showing the rate of interest at which the transaction is offered to be rolled over. All other parameters, including collection of mark to market losses to be collected in cash, shall remain as per existing Rules and Regulations.
In relation to MTS, the SECP consented to look into the possibility of allowing individual investors to take part in MTS market as financiers. It was also agreed that the FPR ratio shall be reviewed for accepting about 10 percent eligible securities within the overall 25 percent cash requirement while keeping in the collection of mark to market margins in 100 percent cash. Further, in order to encourage and enhance the trading activities in various market segments it was agreed to review the existing list of eligible scrips in the MTS DFM, and Margin Financing with a view to increase the number of securities in the list, for augmenting the same.
The Chairman of SECP reassured the participants that the apex regulator would continue to work in close co-ordination with the Exchanges and play a facilitator's role for the development of capital markets and enhancing investors' confidence. He emphasised upon the Exchange to take concrete measures for educating the investors particularly retail investors here and abroad by organising the road-shows, conferences and seminars.
Munir Kamal, chairman of KSE, while thanking the Chairman of SECP for taking this initiative and his keen interest in resolving capital market issues, said that Karachi Stock Exchange on its part would also do whatever is needed for reaching out to investors and resolving all pending issues, so that they are willing to invest and participate vigorously in the market.