KARACHI (April 09 2004): The Securities and Exchange Commission of Pakistan (SECP) has suspended the notice issued by the Karachi Stock Exchange (KSE) issued on March 29 to protect the interest of weak holders.
According to a letter issued to the KSE on Thursday, the SECP said most of the market crises have occurred because of COT, ie either withdrawal of funds by COT financiers or over exposure by weak holders who taken position as COT finance.
“It would be unnecessary for the Exchange to take a decision on COT at time when the SECP is in the process of phasing out COT/badla financing.
SECP further said that the board cannot implement or amend any regulations without the prior approval of the SECP.
As such implementation of measures taken in recently released notice is a violation.
The letter said, “a plain reading of the notice reveals that COT finance and financier would not contribute to the Clearing House Protection Fund (CHPF) and Investor Protection Fund (IPF) and that based on the clarification received from the Exchange, the facility of CHPF to the extent of Rs 50 million would not be available for COT transactions.
“We would like to draw attention towards clause 1 of the COT regulations which states that COT Regulations shall form part of the Ready Clearing Regulations.
Similarly, 5 (c) of the Regulations Governing Associate Membership of the KSE clearinghouse states that associates member conducting COT transaction shall be treated at par with the members of the Exchange in maters relating to settlement of their claims as well as distribution of losses in the event of default by the member of the Exchange in accordance with the relevant rules and regulations.
Similarly any change towards contribution in the Investor Protection Fund Regulations of the Exchange would need the approval of the Commission.”