PSX’s clearing agents fail to handle historic high foreign trade volume

NCCPL reports a delay, says settlement date extended by another working day

KARACHI: A few clearing agents of the Pakistan Stock Exchange (PSX) struggled to handle the historic high foreign trade volume of $987 million conducted on Wednesday despite the bourse taking at least four measures to provide ample liquidity into the system to avoid any such incident.

The huge amount of foreign trades were expected with PSX’s reclassification into the MSCI Emerging Market (EM) from Frontier Market on Thursday (June 1) after a gap of nine years, as foreign investors track the EM with $1.4-1.7 trillion in hand.



The $987 million includes gross buying of $452 million and gross sales of $534 million. The trades were to be settled on June 2 under the T+2 (Trading day + two days) system. The settlements have now been officially delayed to June 5.

The National Clearing Company of Pakistan Limited (NCCPL), which supervises the settlements, reported that there has been a delay in affirming a significant number of trades executed on behalf of foreign portfolio investors as per the designated time schedule (DTS).

“The main reasons for the delay is the significant increase in volume, timing difference with international centres, shorter working hours due to Ramazan and Friday,” said NCCPL in a notification to the PSX.

“In order to ensure seamless clearing and settlement of trades, it has been decided to merge the clearing of Friday (June 2) with the clearing of Monday (June 5). All other operational procedures shall remain the same,” it added.

Meanwhile, an official said that NCCPL made efforts to settle the trade till 2am on Friday. However, a few brokers and clearing agents who deal with foreign investors failed to clear the payments due to liquidity shortage on their end. There are around 10-12 brokers who deal with foreign traders.

“The NCCPL has given undue favour to a few clearing brokers. It has extended the settlement date instead of declaring those clearing agents and brokers who have failed to settle the foreign trades on time as defaulters,” an official told The Express Tribune while requesting anonymity.

“The practice would build a negative image of the PSX due to a few clearing broker agents.

“NCCPL should have ensured the risk management system in place. It should have grilled the defaulting agents and should have charged them with heavy financial penalties,” the official added.



Official said all the regulators and stakeholders of PSX - including the stock exchange itself, the Securities and Exchange Commission of Pakistan and the NCCPL - should be held responsible for the settlement failure on time.

“Such a situation gave birth to the Nisar Ashraf Danka crisis in 2005 at the Karachi Stock Exchange.” A foreign brokerage house in Pakistan had already expressed fear of such a situation arising about 10 days ago.

Published in The Express Tribune, June 3^rd, 2017.

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