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Wednesday, March 26, 2008
KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has said that CFS MK-II will be implemented from the previously announced date of April 7, 2008 and it would run parallel to the existing CFS with same cap till June 30, 2008.
The current Continuous Funding System (CFS) will merge with Continuous Funding System Mark II (CFS MK-II) market with effect from July 1, 2008. These decisions were taken in a meeting chaired by SECP Chairman Razi-ur-Rehman Khan on Tuesday at SECP Karachi Office to discuss the issues being faced by the market participants.
The management and directors of KSE, National Clearing Company of Pakistan Limited (NCCPL), management, representatives from Mutual Funds Association of Pakistan (MUFAP), Brokers from KSE and officials of SECP also attended the meeting.
Current CFS Market will have the existing cap of Rs55 billion and 41 eligible securities.CFS Mk-II market will have no cap and will be available on the following eligible securities with effect from April 7, 2008.
Category “A” CFS MK -II eligible securities are Arif Habib Bank , Crescent Steel, Habib Bank , JS Bank, Jahangir Siddiqui & Co., National Refinery, Pace (Pak), Sitara Peroxide and United Bank.
Moreover, in category “B” CFS MK -II eligible securities are Meezan Bank, Pakistan International Container Terminal and Tri-Pack Films.The SECP said that amendments in the risk management regime for Deliverable Futures, Cash Settled Futures and SIFC Markets would be implemented with effect from the next applicable contract after getting necessary approvals from SECP.
The participants also agreed that release and rollover in CFS Mk-II Market would only be allowed in last 5 working days of the contract in CFS Mk-II Market. Unreleased financing would be forced released on expiration of the maturity of 22 working days.
In addition number of eligible securities in cash settled futures would be increased to 15 securities at the earliest. Eligibility criteria of scrips in CFS Mk-II securities would be reviewed by KSE and NCCPL jointly on May 01, 2008 and revised CFS Mk-II eligible securities would be modified accordingly with due notice to market participants. In addition till July 1, 2008, initial margins in CFS Mk-II will be collected at 100 percent in eligible securities or collateral.
Whereas after July 01, 2008, initial margins will be 100 percent in eligible securities where financing in CFS Mk-II market remains at or below Rs85 billion, 10 percent where financing in CFS MK-II market crosses Rs85 billion but remains at or below Rs100 billion, 20 percent where financing crosses Rs100 billion but remains at or below Rs125 billion, 35 percent where financing crosses Rs125 billion but remains at or below Rs150 billion and 50 percent where financing in CFS MK-II Market crosses Rs150 billion.
“Where any of the above discussed limits is crossed and the respective cash requirement becomes applicable, it would remain in force irrespective of the fact that the financing has reduced below that limit subsequently,” the SECP said.
Further it was decided that initial margins by financier in CFS Mk - II would be 100 percent in eligible securities and other acceptable collateral under the NCCPL Regulations from April 7 and July 1.
It was decided that Mark to Market Losses and Special Margins for Financee and Mark to Market Losses of Financier in CFS Mk-II —- 100 percent in Cash (Bank Guarantees are also acceptable in lieu of margins under the present regulatory framework). It was also decided that infrastructure requirements for CFS Mk-II would be implemented on separate terminals for Authorized Financier and Finance and all market participants would be required to install the requisite hardware and make it available to KSE and NCCPL for system installation by April 04, 2008.
Initial margin in cash settled futures and SIFC would be: 100pc for eligible securities where open interest in the relevant market remains at or below Rs10bn, 10pc in cash and rest in eligible securities where open interest in the relevant market exceeds Rs10bn but remains at or below Rs20bn, 20 percent where open interest is Rs20bn-Rs30bn, 35 percent where open interest is Rs30bn-Rs35bn and 50pc where open interest in the relevant market exceeds Rs35bn.
In addition initial margin in deliverable futures market would be: 100 percent eligible securities where open interest in the relevant market remains at or below Rs20bn and 20 per cent in cash and rest in eligible securities where open interest in the relevant market exceeds Rs20bn but remains at or below Rs30bn, 35 percent where open interest is Rs30bn-Rs35bn and 50 percent in cash and rest in eligible securities where open interest in the relevant market exceeds Rs35bn. Regarding special margin in deliverable futures market would be 50 percent in cash and rest in eligible securities; however, where open interest in Deliverable Futures Market crosses Rs25bn, special margins will be collected 100 percent in cash.
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ISSN 1563-9479 
