KARACHI, Jan 31: A decision on removal of cap of Rs25 billion on Continuous Funding System (CFS) had not been taken yet, but consultations with stakeholders on all matters were in progress, chairman Securities & Exchange Commission of Pakistan (SECP) Razi-ur-Rahman Khan told Dawn on Tuesday.

He said that the court was scheduled to hear the case filed by KSE and in the event of an outcome, the SECP would nominate four members on the Board of the bourses in a couple of days. That might be followed by a meeting of the Board, which would finalize the details of the ‘roadmap for demutualization’ of the KSE, agreed upon by the SECP and demutualization committee of the KSE last week.

The marathon meetings between the apex and the front-line regulators that went on for over a week, had managed to settle many irritating issues. The talks were held in a cordial and cooperative atmosphere and at least one participant thought that it was possible that the cap of Rs25 would eventually be removed, since the arguments for its removal had carried weight. The broker fraternity was also said to have conceded the SECP’s demand to elect a non-member as the chairman of the stock exchanges, in place of the broker chairman, which was the practice in vogue since the birth of the exchange nearly 60 years ago.

The CFS Regulations, 2005 were put into force from August 22, 2005, to fulfil immediate liquidity needs of the market. It had replaced the controversial ‘badla’ or Carryover Trade (COT) system. The plans were to switch over from ‘badla’ to ‘margin financing’ by June last year, but that was not to be due to the unprepared ness of banks. CFS retains most features of the COT, but the market has been sour on the Cap on CFS at Rs25 billion, which as an investor remarked did not make it look like a “continuous” funding system.

A meeting held among adviser to the PM on Finance, Dr Salman Shah; Minister of State for finance, Omar Ayub, the SECP and senior banker Shaukat Tarin, on Tuesday deliberated on the funding for stock exchanges with emphasis on evolving a proper margin financing system.