KARACHI, May 8: A meeting of the Securities and Exchange Commission of Pakistan (SECP) and the Karachi Stock Exchange (KSE) was held on Tuesday, following which a press release was issued by the apex regulator late in the evening.

There was much information cramped in the despatch by the regulator, but quite a few market participants thought that there was barely anything, which was not already known or was ‘new’. There were no decisions, and much of what was stated did not go far beyond suggestions, proposals, directions, advice and recommendations.

“It looks more like unveiling ‘minutes’ of the meeting between the SECP and the KSE’s selected brokers,” said one equity trader, wondering who the “selected” brokers (term ‘selected’ used by the regulator) may have been. But some of the more charitable market participants and analysts thought that it was only correct for the SECP to apply to itself the law of “full disclosure”.

The significance of which may have dawned after a hue and cry by the market on Monday, when several brokers alleged that complete information of what had come to pass in the meeting between the SECP and KSE board on Saturday, had not been made available to the entire market “at the same time”.

The press statement released by the SECP on Tuesday was as follows:

“In continuation with SECP’s policies of close interaction with broker members and member directors, SECP held a meeting with selected brokers to exchange views on various matters of importance to the exchange. The following issues were discussed:1. Cash-settled Futures Contract: It was agreed that the KSE would submit its proposal for improvements in cash-settled futures contract.

2. New derivative products: The KSE to introduce the index futures and options with in three months period.

3. Capital Issues Rules: It was agreed that the KSE would submit its proposal for amendments in Capital Issues Rules, so that listing of more companies would be promoted.

4. Change to T+2 settlement cycle: It was agreed that the settlement cycle should be changed from T+3 to T+2, after obtaining comments from all the stakeholders and giving appropriate notice.

5. Position limits: The KSE members suggested that client-wise position limits in CFS market should be 5 per cent of free-float in a scrip, and 5 per cent in deliverables futures market and cash-settled futures market on a combined basis.

The member-wise limits shall be 10pc in CFS Market and 10pc collectively in deliverables futures market and cash-settled futures market.

6. Inter-broker trading: It was agreed that the KSE would analyse this issue, which is currently prohibited and submit its proposal to the SECP.

7. Trading by employees of brokerage houses: The KSE to submit a proposal whereby trading by employees of brokerage houses is controlled.

8. Off-market transactions: The exchange to submit its proposal in order to record and control such transactions. The SECP is of the view that disclosure of Client-to-Client transactions need to be made mandatory through automated interface. The meeting participants agreed with SECP’s view.

9. Maintenance of order book by brokers: The SECP strongly advised all the brokers that they should maintain proper order books. The KSE to ensure compliance in this respect.

10. Opening of new accounts: Proper documentation should be ensured by the brokers as a pre-requisite for opening of new accounts by the brokers for all customers, including institutional accounts. The SECP to issue necessary directives to all financial institutions instructing them that proper documentation including Board of Directors resolution is provided to their panel of brokers. The bourse to ensure its compliance.

11. Collection of client’s margins: Implementation of financial institutions’ margining system is underway. The SECP advised that it should be expedited, and the KSE and NCCPL should develop the necessary systems, regulations and procedures at the earliest. It was also agreed that it would be followed by a system for collection of margins from individual clients.

12. Roll-over of CFS transactions: The meeting discussed the reasons which motivate the rollover of CFS transactions. The meeting agreed that roll-over of CFS should not be allowed, unless there is a sale in the ready market, and delivery is required to be taken with roll-over of the remaining balance or the maximum maturity of 22 working days has expired. It means that roll-over in CFS shall only be allowed after the expiry of 22 working days, if released by the Financier.

13. CFS Limit Review: The KSE would be shortly submitting the rationale and justifications for enhancement in CFS limit to the SECP, after its Board’s approval. The SECP again emphasised that following outstanding matters need to be implemented before the SECP would review the limit:

1. Implementation of position limits; 2. Regulatory changes of all risk management measures; and 3. Implementation of FIs Margining system.

If approved by the SECP, the CFS limit shall be enhanced after giving 15-days prior notice. It was reemphasised that no member shall provide in-house financing to its clients in any form, including repo, share-financing etc.

14. Trading screen in Peshawar and Quetta: SECP reiterated that KSE trading screens should be provided in Peshawar and Quetta, in order to facilitate the investors in these cities. KSE members agreed that they will work in this matter.

15. Review of Margin Trading and Margin Financing regulations: The meeting agreed that margin trading and margin financing regulations shall be reviewed to make their mechanism more efficient, and do away with excessive reporting requirements.