KARACHI, Dec 20: The Mutual Fund Association of Pakistan (Mufap), known to be one of the few large financiers in the CFS MK-II (badla) market, showed willingness to provide Rs100 million in support to each of the 100 small brokers (financees).

Najam Ali, chairman Mufap told Dawn on Saturday that the association had already conveyed its decision to the regulators.

He said: “We are in talks with banks to take them also on board.”

Investment banks are other major financiers in the CFS, besides, Non-Bank Financial Institutions (NBFIs).

The decision by the Mufap follows intimation by the National Clearing Company of Pakistan Limited (NCCPL) the managers of the CFS on Friday that the CFS MK-II market was opened effective Dec 19 at 4:30 pm on the basis of orders passed by the Sindh High Court on Dec 19.

“Accordingly, CFS MK-II System and CFS MK-II Release System are made available to all the CFS MK-II participants,” the NCCPL had notified.

The market feared large-scale broker defaults in the CFS MK-II market that holds Rs10 billion still to be settled.

“In the light of the High Court judgment, the financees will be required to pay mark-to-market losses from Monday,” observed an analyst, which would include the 20 per cent difference between the floor prices and the prices prevailing on Friday. “The small brokers, though willing to settle their dues, will be hard pressed for lack of liquidity,” says the chairman Mufap.

He stated that in supporting the small brokers, the risk was minimal since they did possess assets, such as the membership card; the clearing house protection fund of Rs50 million and maybe a share portfolio.

The Mufap proposes to reschedule the payment by those 100 small brokers.

“We are willing to extend support to them because they have the intent to pay, but lack the capacity due to dearth of liquidity,” says Mr Najam.

An analyst pointed out that one of the two brokers who had defaulted earlier had run poorly short of paying as small sum as Rs0.3 million per day.