KARACHI (November 30 2006): The schedule of new 'risk management system' (RMS) - excluding client level netting - will be implemented in phases, whereby 50 percent of the applicable margins under the new regime will be applicable from December 4, 2006. This applies to the 'Ready' and CFS market only.

The Karachi Stock Exchange (KSE), in its notice issued here on Wednesday, said that the margins would increase gradually by one percent every week, so that in 50 weeks' time, 100 percent margin collections level would be achieved.

A series of meetings were held between KSE management and SECP to ensure that the proposed 'risk management system' is streamlined and ready for implementation, effective from December 4, 2006. A few changes, identified to strengthen the overall scheme as approved by the KSE Board of Directors and SECP, including collection of margin at the rate of 50 percent and gradual increase thereafter, have been agreed by SECP pursuant to technical constraint faced by KSE in calculating previously announced 30 percent incremental margins of members in respect of netting across settlement.

The change in the margin percentage to 50 percent was adopted to bring the level of margin collection to at least the current level for the market as a whole.

In order to smoothly shift exposure from the existing regime to the new RMS, the limit of maximum number of shares per symbol eligible as deposit against exposure has been enhanced ten-fold from 0.2 percent to 0.05 percent of the free float, to 2 percent and 0.5 percent respectively as per the categories of scrips previously notified. Further, the maximum limit per scrip as a percentage of free float has been increased from 30 percent to 50 percent for the market as a whole.

For companies where free float details are not available, KSE's existing limits for acceptance of securities will be applicable until such time as free float figures are available.

The separation of CFS market from Ready market will be implemented from December 4. Companies having negative EPS will be acceptable for deposit against exposure until further notice. The list of eligible securities shall be posted on KSE website.

Copyright Business Recorder, 2006