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SECP finalises Margin Trading Rules, 2004

KARACHI (July 03 2004): The Security and Exchange Commission of Pakistan (SECP) has finalised the Margin Trading Rules, 2004 to replace the COT/Badla financing.

The phasing out of Carry Over Trade (COT) and initiative to replace it with margin financing had been undertaken. In order to avoid systemic risk associated with COT/Badla financing, the SECP has finalised the Margin Trading Rules, 2004 in consultation with the stock exchanges as well as the CDC.

The Chairman, Security and Exchange Commission of Pakistan (SECP), Dr Tariq Hassan stated this, while inaugurating a new facility for CDC account holders to deposit physical securities in CDS directly through their accounts, here on Friday.

Moreover, he disclosed that an over-the-counter (OTC) market was to be operationalised shortly to provide start-up companies/ expanding companies with greater liquidity as well as the benefits of a public listing. It would also serve as a second tier market for liquid scrips currently listed on the exchanges.

Tariq Hassan further mentioned that demutualisation of the exchanges was in the offing and in this regard, the commission had constituted an Experts Committee, comprising national and international market experts, with the objective of formulating a comprehensive plan for demutualisation and integration of stock exchanges.

About the establishment of commodity exchange, he said that in order to introduce trading in futures contracts in commodities, the SECP had approved the establishment of the National Commodity Exchange Limited (NCEL).

The emergence of trading in futures contracts in commodities would add depth to the capital market, providing investors and stakeholders with basic hedging instruments as well as enabling economic players to lock in costs, he observed.

Later, talking to Business Recorder just after the ceremony was over, the SECP chairman said that the rate of listing of companies in stock exchanges had increased manifolds in the past few months which was an ample prove of the outstanding performance being exhibited in Pakistani capital market.

In a period of only six months, six companies had been listed in the stock market compared to only 3-4 companies listed in last 3-4 years, he added.

When asked whether the commission is considering allowing the trading of TFCs at stock market, he replied that progress was being made in this direction and hopefully a decision would be taken soon.

Tariq Hassan attributed the falling interest rate scenario for the recent slowdown in the issuance of TFCs and hoped that with the gradual increase in the interest rate the prevailing sluggishness would evaporate.

About the development and potential of the mutual fund industry in Pakistan to serve as an effective vehicle for mobilising and channelising savings towards productive sectors, he mentioned that the commission had awarded licenses to about 10 companies in just last six months to introduce mutual funds.

Earlier, CEO CDC, Hanif Jakhura and Chairman CDC, Wahab Kodvavi highlighted the role of CDC in the development of capital market.

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