Securities lending to go live in Pakistan
15 March 2011 Karachi
Image: Shutterstock
The three Pakistani stock exchanges will be introducing a securities lending system from March 21.
Muhammad Lukman, chief executive officer of the National Clearing Company of Pakistan said the margin trading system (MTS) and margin financing system (MFS) were introduced on March 14.
“NCCPL acting as an authorised intermediary shall provide an automated portal to leveraged market participants to access markets through interface made available electronically,” explained Lukman.
“In the past, participants have often complained that the prices of certain equities are unreasonably inflated by one or more influential groups,” said Lukman. “If participants feel that the price of any stock has surged, they can use SLB to short sell in that item,” he added.
Borrowers will be able to borrow equities for a period of up to 22 days, at a rate to be determined by demand and supply. However, the rate will be around Kibor plus eight per cent.
“In the event that there is any sort of corporate action or payouts are announced by the company, those shares will be forced release to the original owner prior to the maturity of the contract under SLB,” he explained.
Cash margin will be collected from the borrower at 25 per cent or value at risk (VaR), whichever is higher, while daily mark-to-market losses will be collected and directly distributed to the lender under SLB.
Muhammad Lukman, chief executive officer of the National Clearing Company of Pakistan said the margin trading system (MTS) and margin financing system (MFS) were introduced on March 14.
“NCCPL acting as an authorised intermediary shall provide an automated portal to leveraged market participants to access markets through interface made available electronically,” explained Lukman.
“In the past, participants have often complained that the prices of certain equities are unreasonably inflated by one or more influential groups,” said Lukman. “If participants feel that the price of any stock has surged, they can use SLB to short sell in that item,” he added.
Borrowers will be able to borrow equities for a period of up to 22 days, at a rate to be determined by demand and supply. However, the rate will be around Kibor plus eight per cent.
“In the event that there is any sort of corporate action or payouts are announced by the company, those shares will be forced release to the original owner prior to the maturity of the contract under SLB,” he explained.
Cash margin will be collected from the borrower at 25 per cent or value at risk (VaR), whichever is higher, while daily mark-to-market losses will be collected and directly distributed to the lender under SLB.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
