KARACHI, May 22: The ‘concept paper’ relating to Continuous Funding System (CFS) MK-II was finalised by the Securities and Exchange Commission of Pakistan’s committee at its meeting on Tuesday, Shaukat Tarin, chairman of the committee told Dawn .
And he added: “we shall take it to all stakeholders within next 30 days”.
In order to avoid confusion, Mr Tarin, who also heads the Board of Karachi Stock Exchange, had taken upon himself the task of acting as the spokesman for the committee and other members were asked to refrain from giving comments to the media, a source privy to the meeting said.
Most members and big brokers “so, therefore”, either feigned ignorance or excused themselves on the ground of “absence” from the committee meeting.
Mr Tarin refuted suggestions that Tuesday’s deliberations on the matter had remained inconclusive. He claimed that considerable progress was made in discussions about CFS MK-II and that the committee would now get down to the business of putting in place necessary legal documents and operating procedures. ‘Time-line’ leading to the launch of the product was also discussed.
A member familiar with the matter said that the modalities are to be devised by June and the product to be launched by July this year.
Earlier this month, SECP Chairman Razi-ur-Rehman had also talked about implementing CFS Mark-II “within the next two months” in his inaugural speech at the National Commodity Exchange Limited (NCEL).
But a couple of institutional heads, who asked not to be named, thought that such timeframe was “too optimistic”. One of them believed that the product may enter the market by the end of current calendar year. The other shook his head.
An equity analyst said that launch of CFS Mark-II had been put on hold since many months. Unlike the current CFS in which the maximum permissible amount is capped at Rs55 billion, the CFS MK-II would “make unlimited financing to investors,” the SECP chief had said.
The booming stock market has been asking for a raise in the upper limit of CFS. On Tuesday, it just about hit the ceiling at Rs54.7bn (maximum permissible limit: Rs55bn) at a comparatively low average rate of 11.7 per cent.
The SECP had first floated a 20-page ‘draft’ on June 28, 2006 providing an introduction to CFS MK-II. It claimed that that the product would be a share financing system that would provide level-playing field to all market participants.
The product envisages authorisation of direct CFS finance by banks and NBFIs, “thereby deflecting market liquidity to official market and onto institutional participants”.
But for all that, some market participants thought that the product had its flaws and those would be hotly debated when Mr Tarin arrives with his proposals to “all stakeholders within the next 30 days”.
