KARACHI, May 17: The National Commodity Exchange Limited (NCEL), which received licence from the Securities and Exchange Commission of Pakistan (SECP) to set up a commodity exchange on Thursday, would start futures trading in Gold from September, NCEL chairman Salim Chamdia said at a press briefing on Friday.

Salim Chamdia, who also heads the board of Karachi Stock Exchange, said that after gold, the proposed exchange would take up forward trading in cotton and over next two to three years, more commodities such as wheat, rice, sugar, etc., would be included.

Paid-up capital of NCEL would be Rs50 million. The KSE would hold 40 per cent of the shares in the Exchange, followed by 20 per cent to be issued to the Agricultural Development Bank of Pakistan (ADBP) and 10 per cent each to the Asian Development Bank and the Lahore Stock Exchange. The Islamabad Stock Exchange would carry 5 per cent of the stock. “We had offered 15 per cent shares in the proposed Exchange to the Karachi Cotton Association (KCA), but they have declined to take those up,” said Chamdia.

He said that for every 10 per cent shareholding in the NCEL, there would be one director on the board, which means KSE would be able to place four of its nominees. Majority of the directors on the board would be persons without trading rights on the Exchange.

Chamdia stated that licences for granting trading rights would be issued to 200-300 persons after evolving an appropriate criteria. Minimum capital requirements for persons with trading rights would be specified and institutions with requisite experience would be encouraged while granting the licence. Regulations for qualification, admission, exclusion, suspension, expulsion and re-admission of persons with trading rights would be specified by the NCEL and approved by the SECP.

To queries regarding objections raised by All Pakistan Textile Mills Association (Aptma) and the KCA to the issue of futures trading rights in commodities to the NCEL, Chamdia stated that he knew of no opposition by Aptma and that the NCEL had held discussions with the KCA. But, he explained that the KCA was dealing in ready cotton, while the NCEL would be trading in the futures market.

He also observed that the issue of physical cotton trading comes under the purview of the Ministry of Commerce while the authority for futures trading vests with the SECP. “The world has changed since the KCA last conducted futures trading in cotton in 1975,” Chamdia said, but clarified that he does not dispute the KCA’s right to also enter futures trading in cotton, saying, “but how can the KSE be stopped from conducting a futures business for which it has the best possible infrastructure in place.”

He stated the KSE had a track record of running the market since 1949 and it had kept pace with the changing requirements of the international stocks trading. “We have fully computerized our trading and settlement and very soon will be going on internet trading,” he said and added the KSE had the state of the art risk management system that ensured adequate default procedures.

Members, he claimed, were adequately disciplined by observing requirements of capital adequacy. The KSE’s National Clearing and Settlement System ensured nation-wide connectivity and the Exchange had a modern Central Depository System. “Thus we consider ourselves capable of running an efficient and orderly market in all respects,” Chamdia contended.