KARACHI, Aug 3: The Karachi Stock Exchange on Wednesday got the bourses regulator’s nod about the release of brokers’ deposits against margin financing by banks and development finance institutions (DFIs).
KSE Managing Director Moin Fudda told Dawn that the KSE received on Wednesday morning the approval of its recommendation in this regard from the Securities and Exchange Commission of Pakistan and implemented it. “We have implemented the SECP decision,” he said.
Last weekend, the KSE had sent to the SECP the required amendment in the rules to accommodate a proposal of the experts’ committee on stock market that investors be spared of keeping double margins -— the one with brokers and the other with banks and DFIs. The SECP was asked to allow bourses’ management to release the brokers’ deposits against margin finance from banks and DFIs once investors get margin finance from the banks or DFIs.
The KSE has sought this relief for investors on the recommendation of the experts committee set up in April to find ways for pulling the stock market out of crisis and preparing it for sustainable development.
Meanwhile, experts’ committee head Shaukat Tarin told Dawn that he had submitted his final report to Prime Minister’s Adviser on Finance Dr Salman Shah. Dr Shah could not be contacted immediately to know if he has submitted the report to the prime minister, but a source close to him said he has.
A senior KSE official told Dawn that the report had recommended that some institutions, preferably the Central Depository Company (CDC), be given the status of lender of the last resort to the bourses.
He said the committee had recommended that a lender of the last resort was required so that the bourses could be steered out of the crisis at the time of need.
Sources close to the committee say whereas the SECP is apparently supporting this idea, the State Bank has reservations on it.
The committee has also recommended that badla financing be allowed to co-exist with margin financing until the market develops some futures products, including index trading and non-deliverable or cash-settled futures of different tenures.
It has also sought an increase in the badla limit from the existing Rs12 billion to Rs20-25 billion. The 14-member committee believes that this is necessary to inject additional liquidity into the market that is the only way for steering it out of the crisis in the short-term.
