Hope floats

SECP assured members of KSE that the proposed margin trading system will be on the agenda of the September 15 meeting.

KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has assured members of Karachi Stock Exchange (KSE) that the proposed margin trading system will be on the agenda of the meeting scheduled to be held on September 15.

“As the apex regulator of equity trade, SECP is the competent authority to deliberate over the fate of the margin trading system,” said Munir Khanani, a director of the exchange. “We have been assured by the SECP that in their upcoming meeting on Wednesday, the margin trading product has been included in the agenda. We are hopeful that it will be approved soon.”

When questioned over reservations expressed by KSE Chairman Zubyr Soomro regarding risk management and transparency in the proposed system, Khanani responded:

“The major concern was over rules pertaining to investors providing financing. We were asked for further clarification by the chairman and we have provided it,” he contended. Approval from the SECP would clear the way for introduction of the new financing system, he added.

However, sources privy to the board meetings claim that notes of dissent are yet to be removed. The chairman of the board had formally included notes of dissent in the proposal when it was brought before the KSE’s board of directors.

Meanwhile, analysts expect the SECP to mediate the crisis by reaching a compromise.

“The commission is likely to approve the draft proposal after making some amendments,” commented Khurram Shehzad, Research Head at InvestCap. “The regulator may enhance disclosure requirements or increase collateral and margin requirements,” he explained.

Shehzad said that declining market volumes are hampering “efficient price discovery in the market” and that “margin financing would help bring back investors and also counter market manipulators’ efforts.”

Even after endorsement from the apex regulator, investors will not be able to avail the margin trading facility for several weeks.

The margin trading system draft will be sent to the finance ministry for final approval, which is expected to take another four to six weeks.

Published in The Express Tribune, September 14^th, 2010.