Karachi Stock Exchange members have constituted a committee comprising the members of KSE Board of Directors and some senior brokers at a meeting held here on Wednesday to take up anomalies and pending issues with SECP.

The committee would look into anomalies in the scheduled implementation of revised Client Level Netting (CLN) on March 05 and to resolve other pending issues with SECP like urging KSE members to provide their clients’ transaction data for a period of January-July 2006 by March 09, which the have denied to do so.

The members of the Committee include Shehzad Chamdia, Muhammad Shoib Memon, Dawood Jan Muhammad, Sikandar Esmail Bagasrawala, Amin Issa Tai, Muhammad Yasin Lakhani, Firozuddin A. Cassim and Aqeel Karim Dhedhi

Committee would seek an appointment with the Chairman SECP to address their concerns and for their resolution before the implementation of the CLN system.

On a joint representation received from 71 members of the Exchange expressing their concerns over the introduction of CLN without addressing various pending matters, the management of the Exchange arranged an informal meeting of the members on Wednesday, said a KSE press statement.

During the meeting a number of issues were raised by the members which, inter alia included: Trading data asked by the SECP relevant to clients for the period January 1, 2006 to June 30, 2006 as per SECP directive.

Secondly, introduction of the CLN without addressing the matters included: (a) Introduction of margins payable by financial institutions directly to the exchange. (b) Across the settlement netting to the extent of square-off positions of client in ready market. (c) Disbursement of the profits collected against market-to-market losses immediately. (d) Review of capital adequacy regime in the light of netting system and (e) Exemption of margin against deliveries of outstanding sales position.

Meeting expressed views on each and every aspect of the CLN in context of the matters referred to above. They were ready to implement CLN subject to removal of anomalies, especially arranging exposures by financial institutions directly to KSE, which comes solely in the domain of SECP.

Members expressed their serious concern over the latest information asked by the SECP in relation to client level transactions for the period January 1, 2006 to June 30, 2006. Meeting resolved that since the Unique Identification Number (UIN) system was introduced from August 2006 there was no reason to ask information which was neither readily available nor can it be arranged after a lapse of one year.

The Members also observed that the detailed daily data on trading is being forwarded by Exchange to the SECP for over last five years. Accordingly, the SECP must have the relevant information in their office and as such the reason to call for such information once again is not clear. The Members observed that the information asked by the SECP was not relevant to any specific case nor was any reason for asking such information in relation to all clients, which may compromise the confidentiality of clients. It was further observed that such acts and attitude on the part of the Regulator is creating confusion and seriously affecting the investors’ confidence especially in a situation when the government at the highest level is making concerted efforts to invite and attract foreign investments in the country.

It was further observed that the frequent changes in the reforms in hand and introduction of new reforms by SECP an on going basis with an obsession on timelines have possible adverse impact on market prices. These portray a bad impression of capital market in particular and the country in general.

Members also stressed that it is of critical importance for the growth of the Capital Market for SECP to give a long-term road map for reforms, which is achievable and realistic.

Meeting also expressed their concern over the SECP attitude in the matter of procedure of entitlement of bonus/right share in the CFS market which was a normal practice followed by the Exchange for the last many decades without recourse to any alternate system. As a result of their refusal to accept the recommendation of the Exchange as communicated by their reply vide their letter dated January 15, 2007, which was circulated amongst the members the market sentiment was badly affected due to this decision.

It was also observed that while the KSE management and members are fully prepared and ready for the implementation of CLN on scheduled time i.e. March 5, 2007, they observed that the relevant issues as highlighted above as well as already taken up by the management of the Exchange on February 23, 2007, need to be addressed and resolved immediately to pre-empt any major upheaval in the market.

The members observed that in such an eventuality the responsibility will solely be of SECP, meeting resolved.

Source: The News