CDC rationalises tariffs structure for equity transactions

KARACHI: The Central Depository Company (CDC) on Wednesday announced rationalisation of its tariffs structure for the settlement of shares’ transactions to encourage investments into the capital market.

The CDC, which is the sole entity handling paperless settlement of transactions carried out at the Pakistan Stock Exchange (PSX), slashed its tariff structure in the larger interest of the public and to support the stock market.

The CDC recently provided 100 percent waiver on maintenance fee for subaccount holders who also have investor accounts.

“Taking this initiative further in order to promote the growth of Pakistan’s corporate debt market, CDC has significantly reduced its annual fee for long-term redeemable securities by approximately 65 percent,” the CDC said in a statement. “Additionally, CDC has rationalised its tariff structure for the next five years which also includes reduction in custody fee for 2019/20 and 2020/21 by 14 percent and 16 percent, respectively.”

The benchmark 100-share Index of the PSX has lost half of its market value in the last two years. Analysts said investment inflows are already gravitating towards high-yield government securities on ratcheting up interest rates, which reached 12.25 percent in a back-to-back rate hike from six percent from January last year. High interest rates always keep the market forward price-earnings ratio low as local investors prefer to invest in high yielding bonds, they said.

“Spread between earnings yield and treasury-bill yield in 2019 is expected to narrow to 150 basis points – spreads of 545 basis points in 2017 and 270 basis points in 2018,” Topline Securities said in a report. “This is due to steep rise in interest rates while earnings yields will rise by fraction of this supporting our view of flows moving to bonds.”

Badiuddin Akber, chief executive officer of CDC said the tariff rationalisation would give much-needed relief and support to the market, especially the investing public.

“While CDC continues to reduce its tariff since its inception, we are targeting our efforts towards helping reduce the cost of doing business for market participants. This is our ongoing contribution towards the development of Pakistan capital market.”

The CDC’s main objective is to provide efficient and cost effective services to all its customers and promote ease of doing business. “In line to this resolve, CDC has continued to pass on the benefits to market participants and general investors without compromising on its services,” the company added.