KARACHI (October 19 2006): The Securities and Exchange Commission of Pakistan has asked Karachi Stock Exchange to create a mechanism to enforce payment of margins by institutions. While assuring KSE of full support in this behalf, the SECP has asked the front line regulator to come back to it with a proposal for special margins for finalisation.

SPECIAL MARGIN SHALL BE:

i. Applicable to CFS and the Deliverable Futures Markets only and not to Ready Market.

ii. Payable in full by CFS Financee if the variance between the transaction price and the 26 weeks moving average of that scrip exceeds by more than 10 percent.

iii. Subject to review after 8 months; and

iv. Collection of the margins shall be in a phased manner as follows:

a. 50 percent of the Special Margin shall be applicable for a period of 4 months commencing from November 6, 2006,

b. 75 percent of the Special Margin shall be applicable for a period of 4 months commencing from March 6, 2007,

c. Thereafter 100 percent of Special Margin shall be applicable with effect from July 6, 2007.

DEPOSITS: The SECP has also proposed an increase in the number of approved securities acceptable for deposit of margins and exposure from the current list of the 195 approved by the SECP and notified by the Exchange on September 29, 2006 to 456 which are currently eligible for deposit against exposures at the KSE. However, the additional 261 companies shall be included for the purpose of deposits as a separate category subject to 60 percent haircut.

Copyright Business Recorder, 2006