The securities exchange, central depository or clearinghouse desirous of providing a platform to facilitate transactions relating to any of the leveraged market contracts may approach Securities and Exchange Commission of Pakistan (SECP) for acting as an authorized intermediary for the respective leveraged market contracts.
Through SRO 1256(I) /2017, the SECP has issued draft of the Securities (Leveraged Markets and Pledging) Rules, 2017 here on Monday. Under the proposed rules, the Commission shall determine the number and places for the establishment of authorized intermediaries.
A securities exchange, central depository or clearinghouse desirous of providing a platform to facilitate transactions relating to any of the leveraged market contracts may make an application to the Commission for the purpose of acting as an authorized intermediary for the respective leveraged market contracts.
The Commission may, while registering an applicant as an authorized intermediary, specify conditions for such registration to be complied by the authorized intermediary in such manner and time, as it may think fit.The rules said that an authorized intermediary shall provide a platform to facilitate transactions of the respective leveraged market contracts; ensure that the requirements of these rules, the regulations and the requirements specified by the Commission and directions of the Commission are being complied with; ensure that a fair, transparent and efficient system for entering into and carrying out respective leveraged market contracts is provided in accordance with the regulations and all other applicable laws; make suitable amendments in the regulations from time to time with the approval of the Commission; correctly record all transactions relating to respective leveraged market contracts; submit to the Commission such periodic returns and other information as specified by the Commission and correctly disclose such information, as specified by the Commission, to the public relating to the respective leveraged market contracts.
An authorized intermediary shall ensure that the total financing provided by a margin financier and or trading financier at any point in time or total financing provided to a single financee or to customers of one broker or total financing provided in respect of any particular security, does not exceed the limits specified in the regulations; ensure that the total financing obtained by a single financee or all financees or in any particular security, at any point in time, does not exceed the limits specified in the regulations and ensure that total lending by a lender or borrowing by a borrower, at any point in time, of a particular security does not exceed the limits specified in the regulations.
The rules said that an authorized intermediary shall not provide false or misleading or incomplete information to the Commission. An authorized intermediary shall cooperate in any audit, enquiry, inspection or investigation ordered by the Commission and comply with such other directions as may be issued by the Commission.
The SECP has also issued eligibility criteria for a margin financier. A person eligible for registration may make an application to the authorized intermediary for registration which shall be accompanied by the relevant documents. If the authorized intermediary is satisfied that the eligibility criteria under rule 8 has been met with and the documents required under rule 9 have been submitted, the authorized intermediary may register the applicant as a margin financier.
A margin financier shall not commence its business unless it has executed such agreements and assurances and furnished such documents as required by the authorized intermediary and specified in the regulations, the SECP said. The authorized intermediary may suspend or restrict with immediate effect a margin financier from providing margin financing and shall immediately notify to the Commission and market participants of such restriction or suspension, if such financier is not in compliance with the eligibility conditions, fails or refuses to comply with any provision of these rules or any directions, orders or circulars issued by the Commission or fails or refuses to comply with the regulations, rules added.