November 02, 2006	Thursday	Shawwal 9, 1427

KARACHI, Nov 1: A team of six member directors of the KSE board would proceed to Islamabad on Thursday morning to discuss some of the features of revised risk management systems (RMS) with the Securities and Exchange Commission of Pakistan (SECP), it was learnt on Wednesday.

The delegation is expected to be accompanied by about 20 to 25 stock brokers. The principal item on their agenda is to persuade the apex regulator to direct the implementation of new systems in gradual phases instead of on a firm date of July 6.

A member director, who would fly to the capital, said on condition of anonymity that it was possible that the team may argue with the apex regulator on the urgency of clamping such strict rules on risk management systems.

“In the last three years, the KSE has been through at least two major crisis and yet no broker default has occurred,” he said, adding that it was a proof that risk management systems were already in place and strong at the bourse.

He said that it was necessary to suggest to the regulator to grant extension in the date of implementation of revised risk management systems, particularly the netting regime and introduce them gradually in a phased manner.

The member thought that the plunge of 500 points in the KSE-100 index in two days of trading was a sign of investor panic on the immediate impact of new measures on the market.

“At a time when the foreign portfolio investment is at its record peak, such things are spoilers of the market,” he said. The question was: would the apex regulator give a patient hearing to the KSE members’ plea?

SECP Chairman Razi-ur-Rehman Khan could not be reached, but a source at the SECP affirmed: “We are always open to discussions”.

Earlier during the day on Wednesday, the KSE management explained the revised risk management systems and its impact on the bourse to the Press. A day earlier on Tuesday, those were presented to the members.

The salient features of the new RMS include: Segregation of CFS market and T+3 market; financier purchases under CFS not to be netted with sale in T+3 market at scrip level; CFS markets to have additional margins of 2 to 5 per cent; CFS margins to increase in proportion with increase in KSE-100 index; CFS financier to keep financed securities in a separate account with CDC; leveraged positions in CFS and derivatives not to exceed beyond 15 times of a brokerage house’s net capital balance.

The extensive presentation was made by the Acting Managing Director of KSE Yacoob Memon and the chief manager operations, Haroon Askari. The revised RMS would be effective from Nov 6.

The effective date met with lot of flak at the presentation to the members and the Press also questioned the extent of co-ordination between the SECP and KSE on such issues.

The members had also expressed their displeasure on unveiling of such important procedures in the absence of the KSE managing director M.A. Lodhi (who is out of the country).

Some members thought that the new risk management systems should have been more elaborately discussed and debated before implementing them in what they thought was being done in haste.