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KARACHI : Karachi Stock Exchange is likely to propose to the SECP that the mark-up rate should be capped in the Margin Financing (MF) system and the financing facilities should be allowed in any other deliverable stocks, it is learnt.
In its feedback to the Securities and Exchange Commission of Pakistan on the Consultative Group's Concept Paper on Margin Financing, KSE is expected to propose that there should be 44 days lock-in-period for restricting financier to release the MF transactions, however, the financee may have the option to release such transactions as and when he requires, sources told Business Recorder, on Friday. Karachi Stock Exchange has almost finalised its proposals on margin financing and would send them to the SECP soon.
Sources said KSE also favours that brokers as financiers should be allowed to finance other brokers of the same exchange for their respective clients and proprietary accounts and the mark-to-market losses should be managed by a central party or the system provider. Karachi Stock Exchange also wants that maximum number of securities eligible for MF facility should be selected based on some stringent criteria.
The exchange also wants that the Securities Lending Borrowing (SLB) facilities should be made available in parallel to the MF system in the market. It is learnt that these proposals were also discussed in the meeting of KSE Trading Affairs Committee held here on Friday and after approval of the committee these proposals would now be forwarded to KSE board for its approval. The board's meeting would be held in the first week of July 2009.
The SECP revived the Consultative Group on Capital Markets under the chairmanship of Aftab Ahmed Diwan, Chief Operating Officer Central Depository Company of Pakistan Limited (CDC) on May 5, 2009.
The group has representation from Karachi Stock Exchange, National Clearing Company of Pakistan Limited, banks, mutual funds, SECP and other capital market experts. The SECP said that the group will act as an independent think tank for important policy decisions in relation to the development of capital markets in Pakistan.
The group will be reviewing international best practices and suggest measures for the overall growth and development of capital markets particularly in the areas of new product development including alternative leverage products, debt capital market, new listings, risk management and market monitoring and surveillance, etc.
The Consultative Group submitted its first report on "Margin Financing" to the SECP. This report was forwarded to all relevant stakeholders including State Bank of Pakistan, Mutual Funds Association of Pakistan, Pakistan Banks Association, Investment Banks Association of Pakistan, Leasing Association of Pakistan, Modaraba Association of Pakistan, stock exchanges and the National Clearing Company of Pakistan Limited for their feedback and comments on June 9, 2009.
The SECP had asked all the stakeholders to send their comments on the said report till June 25, 2009. The SECP will take a decision soon to introduce MF or any other leverage product at the share market in light of the comments being sent by all stakeholders.
Copyright Business Recorder, 2009
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