LAHORE (October 10 2004): The Central Depository Company (CDC) introduced Deposit Functionality in its Investor Account Services (IAS) here on Saturday, which will help retail investors to deposit their physical securities in the Central Depository System (CDS) directly through their own investor account.
Securities & Exchange Commission of Pakistan (SECP) Commissioner Abdul Rehman Qureshi inaugurated the CDC service.
CDC Chairman Basheer Janmohammad, Chief Executive Officer Hanif Jakhura, LSE Chairman Syed Asim Zafar, LSE Managing Director Hamid H. Imtiazi, brokers and investors were present.
Speaking on the occasion, Abdul Rehman Qureshi lauded the role of the CDC in the development of the capital market, and commended the CDC for its efforts in making necessary arrangements to provide facility of share deposit in investor own account to retail investors in Lahore.
Previously, he said the dematerialisation from physical securities to electronic securities was done through a stockbroker or a financial institution.
Highlighting the role of retail investors, Qureshi said they play a key role in broadening and deepening the stock market, broad-based equity ownership and redirecting household savings into more productive channels.
“No doubt, our capital market has achieved a remarkable growth in the recent times, but the retail investor-base in our country still remains under-developed”, he added.
Despite the fact that the basic infrastructure for a vibrant capital market is in place, the market remains narrow with a thin investor-base, as approximately 35-40 scrips account for 95 percent of the total market capitalisation, he observed.
Qureshi said one of the main reasons for this narrow investor-base is the lack of infrastructure facilities to cater to small investors, as trading activity is mainly concentrated at Karachi, Lahore and Islamabad.
In expanding the investor-base of the market, the most crucial prerequisite is building retail investors, he said, adding in Pakistan, for lack of knowledge about capital markets among the public and potential investors has been a matter of concern.
“I understand that for brokers, investors and other stakeholders, education is key to broadening market participation and minimising market abuse and fraud. The SECP in this context has prepared an investor guide to educate investors about the risks and rewards of investment in stock market”, he added.
The SECP commissioner also urged the capital market institutions to raise the quality and number of investors by holding seminars and workshops for educating them about the basics of companies accounts analysis, and the value of corporate governance and their right as investors and shareholders.
At present, it is being realised that if investors have to be attracted to the capital market, the companies have to put its houses in order by observing international accepted practices of the corporate governance.
Mentioning the SECP reforms, he said: “We have introduced ground-breaking reforms over recent years in the fields of risk management, transparency and investor protection, which have contributed significantly towards the growth and development of the capital market and the upsurge in investors' confidence.
He also urged the brokers to open their houses in other big cities of the country in order to attract investors.
CDC Chairman Basheer Janmohammad stressed the need for privatisation of mega projects like KESE, PSO and further disinvestment of PPL, Sui Southern, Sui Northern, OGDC, National Bank, and other units, at present, in control of the government.
About CDC future plans, he said it would move to its own building at Shahrah-e-Faisal, Karachi, with state-of-the-art technology security systems in first half of the year 2005, adding the CDC will also arrange seminars to create awareness of security and comfort offered by the company.
He said the company has shown remarkable growth in its performance, and almost all companies listed at stock exchanges are enlisted with the CDC.
At present, there are about 551 securities in CDS besides around 438 account-holders, which includes stock exchanges and banks, he said, adding in fact, the CDC is custodian of securities of about Rs 520 billion, while there are over 15,000 investors' accounts, and this number is increasing day by day.
CDC Chief Executive Officer Hanif Jakhura said with this new service, the investors would have a complete control over dematerialisation of their physical securities, adding this will not only reduce the burden of deposit requests on the participants, but also offer cost-effective and efficient service to the investors.
Giving presentation on the achievements of the CDC over the year, he pointed out the CDC has introduced countless number of services, including live operations of CDS, and TFCs inclusion in the CDS, electronic mergers, trustee services, paid rights facility and complete implementation of National Clearing and Settlement System.
He said the CDC has cut down its tariff rates substantially over the years to deliver the benefits of the electronic system to the investors, adding the transaction fee alone was brought down by 73 percent to Re 0.0027 from Re 0.01. Similarly, the transaction fee for IAS was reduced by 73 percent to Re 0.0054. The IAS annual fee was also reduced by 50 percent to Rs 1,500.
He also said the CDC has played a vital role in increasing the average daily turnover of stock exchanges, and informed the participants that the CDC has very ambitious plans for future which includes, introduction of units of open-end mutual funds, outsourcing of Investor Account Services through banks, securities lending/borrowing, share registrar service, etc.