Margin trading proposal approved by NCCPL

KARACHI: Approval has been granted to the concept paper proposing a margin trading mechanism for local stock exchanges by the board of the National Clearing Company of Pakistan Limited (NCCPL).

The NCCPL board met on Wednesday to discuss broad modalities laid out for the proposed margin trading product. These included the establishment of a platform that would link financiers and those seeking funds at all three stock exchanges.

“The board has approved the concept paper and this has been communicated to the SECP, now NCCPL is busy formulating specific rules and regulations for trading. The technical requirements of the trading platform are also being looked into,” disclosed a source from within the NCCPL to The Express Tribune.

After the approval from NCCPL, the draft Securities Act of 2010 awaits approval from the board of Karachi Stock Exchange (KSE). The KSE board had met on Monday to approve the draft but official sources told The Express Tribune that the chairman of the board had registered dissent on some aspects of the proposed mechanism.

“The risk and operations departments of the exchange are currently working on some amendments for the draft,” said Anita Mirza, official spokesperson of the KSE. She expressed hope that the revised version of the draft would be tabled next week.

Experts believe that that pending the introduction of proposed leverage tools for trade in equities, participation in the market has decreased significantly. Trading volumes at the KSE had plunged to an average of less than 60 million shares per day in the beginning of July.

Investors’ interest has revived slightly on the back of corporate result announcements and developments on the margin trading front. “Timely approval of the margin trading product is imperative for improving volumes and market depth,” commented a senior analyst, Hasnain Asghar Ali.

Brokers at local bourses have expressed hope that the KSE board will also approve the draft act within a week.

After receiving the green signal from all stakeholders, the draft Securities Act of 2010 is expected to be reviewed for changes suggested by the Securities and Exchange Commission of Pakistan (SECP).  Once the changes have been incorporated, the draft will be forwarded to the finance ministry for final approval. Analysts expect that the entire process will be completed by the end of August.

Managing Director Karachi Stock Exchange Adnan Afridi is the chairman of the NCCPL board. Among the members, Aliuddin Ansari has been nominated by the SECP while acting MD Lahore Stock Exchange (LSE) Ahmer Hasan and Mazhar Rafiq are representing the LSE. Muhammad Lukman, CEO of NCCPL, is also part of the board.

Published in The Express Tribune, July 29^th, 2010.