KARACHI, Aug 17: The board of directors of the Karachi Stock Exchange (KSE) has announced lifting of ban on short selling in futures contract from September 2006.

A notice issued by the KSE late in the evening on Thursday also identified several other measures that the board had taken in its meeting.

Those steps included: (1) the mechanism of lower circuit breaker of 5 per cent or Re1, whichever was higher would continue until further orders; (2) the prohibition placed on short selling in futures contracts would stand withdrawn from September 2006 in accordance with the relevant regulations; (3) deposit of 100 per cent margin in the form of approved securities in futures contract would continue until further orders; and (4) CFS facility in 30 approved securities already eligible for future contract would continue within the prescribed CFS limit.

However, CFS outstanding positions in two scrips, namely Fauji Cement and Pakistan PTA (not included in the list of Futures Eligible Securities) would remain open till September 17, 2006 and would be available to financees for release/settlement purposes only on daily basis. All un-released open positions in those two scrips would be ‘forced release’ for settlement on the above mentioned date.

The board said that the implementation of the above decisions were subject to approval of the Securities & Exchange Commission of Pakistan (SECP).

Sitting director at the KSE Haji Ghani Haji Usman told Dawn that the major decision was the lifting of prohibition on short selling in futures contract. The board had decided to take that step as the market had stabilised and there was unwavering demand from members and investors to lift the ban.

It has to be recalled that it was on June 14 that an emergency meeting of the KSE board had announced several measures in an effort to put a floor under the stock market fall. On that black Wednesday, the KSE-100 index had collapsed by 548 points, representing the biggest ever single day decline in the history of the exchange.

Those measures included, among others, putting temporary ban on short selling in future contracts. The trick had worked since the very next day, the KSE-100 index recovered by a massive 410 points, putting an end to a long nightmare of incredible losses to investors due to unstoppable fall in stock prices.