ISLAMABAD, Oct 28: The Securities and Exchange Commission of Pakistan (SECP) on Monday announced the creation of “commercial paper”, a new financial instrument aimed at broadening the money market.

In this connection, it unveiled its “guidelines for the issue of commercial paper” as required under the financial markets (non-bank) governance programme loan 2002-2005 offered by the Asian Development Bank recently.

Commercial paper, as an SECP source explained, is a short-term promissory note issued by corporations with a minimum credit rating of A- for long-term and A2 in short-term arrangements. These instruments are typically used for financing working capital requirements.

Through its guidelines, the SEC has notified the eligibility, duration and size, mode of issue, expenses and the investors in Commercial Papers. Furthermore, they specify the role and responsibilities of the issuer, the issuing and paying agent (IPA) and the credit rating agency (CRA).

The procedure for issue and standby facility with financial institutions are also included in the guidelines.

Giving further details, the source said under the guidelines, the maturity period of a Commercial Paper would range from as short a duration as 30 days and as long as one year. This would, however, be subject to the condition that the equity of the issuing company would be not less than Rs100 million as per its latest audited balance sheet.