KARACHI (October 19 2006): The Securities and Exchange Commission of Pakistan (SECP) has allowed short selling in futures market from the November 2006 contract. The Karachi Stock Exchange (KSE) announced this in a notification issued here on Wednesday.

However, the notification said that in case the net sale position of a member in a scrip is more than 0.5 percent of the Free Float, such members shall either deposit the actual shares sold or give documentary evidence that equivalent shares required by member for final settlement at the maturity of contract are lying unencumbered in Central Depository Company (CDC) or with some bank or DFI, which can not then be sold or pledged or in any way utilised till the open interest remains.

It may also be noted that, effective from November 6, 2006, the deposit against Exposure will be required to be paid 50 percent in cash and rest in approved securities.

Moreover the basic deposit for futures market has also been revised from Rs 150,000 to Rs 500,000. As such all members are required to send a cheque for Rs 350,000 towards the difference of basic deposit in order to bring it up to of Rs 500,000--latest by November 3, 2006.

The short sale was banned on June 15, 2006 after the June 2006 crisis at Karachi Stock Market and, according to analysts, the short sale was banned to stop bearish trend at the share market. They were optimistic that the volume at the share market would increase after allowing the short selling.

Copyright Business Recorder, 2006