Rules for CFS implementation notified

The Karachi Stock Exchange (KSE) has released rules and regulation pertaining to ‘continuous funding system’ (CFS) started from Monday on real time basis while the limit has been reduced by nearly Rs 500 million, following consent from the management of the Exchange.

THE NOTIFICATION SAID:

1.ENTERING PREMIUM PERCENTAGES INSTEAD OF PREMIUM RATES: In order to limit the CFS premium rate up to 18 percent, the TWS operators would enter the percentage at the time of seeking funding by the Financee, rather than placing the premium rate in the absolute form.

2. CAPPING OF CFS TO RS 25 BILLION:

Rules for CFS implementation notified

The Karachi Stock Exchange (KSE) has released rules and regulation pertaining to ‘continuous funding system’ (CFS) started from Monday on real time basis while the limit has been reduced by nearly Rs 500 million, following consent from the management of the Exchange.

1.ENTERING PREMIUM PERCENTAGES INSTEAD OF PREMIUM RATES: In order to limit the CFS premium rate up to 18 percent, the TWS operators would enter the percentage at the time of seeking funding by the Financee, rather than placing the premium rate in the absolute form.

2. CAPPING OF CFS TO RS 25 BILLION:

Stocks futures decline

The stocks futures open interest at Karachi Stock Exchange fell during last week, and settled at Rs 15.3 billion on Friday, December 16, as selling in some scrips forced the investors to offload their positions.

Futures contract investment fell by Rs 0.75 billion from previous Friday’s (December 9) open interest of Rs 16.04 billion. The decline in open interest was caused by intra-day corrections during the week where equity prices used to rise in the early part of the trading session, only to see a great chunk of those gains wiped off by the end of the trading session.

Investment under CFS stands capped

Total investment under the Continuous Funding System (CFS) on the Karachi Stock Exchange throughout the previous week stood unchanged at the cap level of Rs25 billion, demonstrating that the financing limit of Rs25 billion is small keeping in view the increasing demand.

Analysts said that an idea of more funding may well be had from the fact that the CFS worth about Rs2 billion was billed as outstanding bids.

However, CFS rates at the KSE showed a modest rise at 16.5 per cent from the previous 16.2 per cent a week earlier. They touched the week’s highest at 16.8 per cent briefly.

Investment under CFS stands capped

Total investment under the Continuous Funding System (CFS) on the Karachi Stock Exchange throughout the previous week stood unchanged at the cap level of Rs25 billion, demonstrating that the financing limit of Rs25 billion is small keeping in view the increasing demand.

Analysts said that an idea of more funding may well be had from the fact that the CFS worth about Rs2 billion was billed as outstanding bids.

However, CFS rates at the KSE showed a modest rise at 16.5 per cent from the previous 16.2 per cent a week earlier. They touched the week’s highest at 16.8 per cent briefly.

More financing modes available at bourses

Investors at capital market after reaching the limit under Continuous Funding System (CFS) have more avenues to finance shares to purchase, like in-house badla, futures options and other derivatives, soon to be formulated.

After being effective from August 22, 2005, the CFS in 14 scrips has reached its upper limit of Rs 25 billion.

The response of the market to the announcements made after the meeting of brokers, SECP and Prime Minister, which included launching of CFS, launching of Pre-Trade Verification System and increased tenors for future contracts, was very positive and the KSE-100 index gained 278 points, with trading volumes increasing by 69 percent on day-to-day basis from less than 200 million to over 300 million shares.

More financing modes available at bourses

Investors at capital market after reaching the limit under Continuous Funding System (CFS) have more avenues to finance shares to purchase, like in-house badla, futures options and other derivatives, soon to be formulated.

After being effective from August 22, 2005, the CFS in 14 scrips has reached its upper limit of Rs 25 billion.

The response of the market to the announcements made after the meeting of brokers, SECP and Prime Minister, which included launching of CFS, launching of Pre-Trade Verification System and increased tenors for future contracts, was very positive and the KSE-100 index gained 278 points, with trading volumes increasing by 69 percent on day-to-day basis from less than 200 million to over 300 million shares.

Pre-Trade Verification System at the Stock Exchanges

The pre-trade verification system would be put into place from Monday (Sept 12) at the stock exchanges. That was one of the nine points on which market players and the corporate regulator had inked an agreement in the presence of Prime Minister Shaukat Aziz on August 19.

The system is universally believed to be a step that would strengthen risk management measures, which would eventually contribute to improving the health of the bourses. But the question that boggles many minds is whether the stock exchange has developed or acquired the required technology and software to introduce the system as early as on September 12 and whether all market players have adequate knowledge of how the system would function?

Continuous funding system takes off

The continuous funding system (CFS) took off at the Karachi Stock Exchange on Monday with enthusiastic investor’s response, as the KSE-100 index gained 279 points. According to analysts, the CFS rate on Monday stood at 16.9 per cent with the level of investment at Rs16.3 billion.

KSE Chairman Yasin Lakhani told Dawn that the new system would fulfil the immediate liquidity need of the market and would create stability and restore confidence. He also said that the CFS would eliminate shortcomings in the badla system.