KARACHI, July 10: The Securities and Exchange Commission of Pakistan (SECP) issued a directive to stock exchanges on Sunday evening stating that the ongoing COT (badla) phase-out had been suspended and the COT investment capped at Rs12 billion.

The SECP directive to stock exchanges stated that the step had been taken on the request of stock exchanges and small investors. The apex regulator observed that “based on the fact that margin financing has not been developed to the desired level it has been decided to suspend COT phase-out and to cap the total COT financing at Rs12 billion until further order to facilitate a smooth transition from COT financing to alternative modes of financing, including margin financing”.

The COT financing is currently available in seven scrips — PTCL, OGDC, PSO, NBP, POL, DGKC and HUBCO. The weekly phase-out of COT by 8.25 per cent starting from June 8 to bring the badla investment to zero by August 26 had been at the heart of controversy between the SECP and stock exchanges. In the five weeks since the beginning of weekly reduction from June 8, the COT investment had dried up from Rs22 billion to Rs12 billion.

Analysts said that the step taken by the SECP would enliven the stock market which had seen quite a sharp decline in terms of volume since the start of the phase-out programme. But the market was generally buoyant last week in anticipation of the COT suspension, believing that the government was taking a deep interest in the matter.

The SECP directive on Sunday asked the stock exchanges to strengthen risk management measures relating to COT which had been withdrawn earlier in anticipation of the badla phase-out.