Securities and Exchange Commission of Pakistan (SECP) has amended Securities (Leverage Markets and Pledging) Rules, 2011 as a result of a long debate in a series of sessions with stakeholders to resolve the long standing issue of stringent Margin Trading Regulations introduced in the capital market in recent years. It has been learnt in a press release issued by SECP.
Market participants appreciated such amendments in Securities (Leverage Markets and Pledging) Rules 2011 promulgated by federal government in February, 2011. Since failure of CFS Mk-II in 2008, there exists no leverage product available to the investors. The general investors disappeared from the market at large resulting in a slow down of market performance in terms of returns and turnover. There was need to introduce leverage product in line with the international best practice which commensurate to the prevailing environment in the stock market since 2008 crisis. The Securities (Leverage Markets and Pledging) Rules, 2011 introduced MTS as an alternate product of obsolete CFS Mk-II but stringent rule of MTS could not rescue the sinking ship of capital market. In view of the recent step initiated by the regulator to revitalise the stock market activities would attract new investors and gain confidence of market participants. It is aspired that the amendments in MTS will boost up the market activity, improve the deteriorating trading turnover and stimulate the small and medium size enterprises to inject their capital into investment stream through participating in MTS.
Mr Aftab Ahmed Ch., the CEO and managing director of Lahore Stock Exchange Limited while commenting on the relief package said that investors seeking to avail leverage position in the stock market has been given relief through modification of Financing Participation Ratio (FPR) whereas previously the Financees were required to deposit 25 per cent cash to carry his long Ready Market position through MTS beyond the T+2 Rolling Settlement System. Now the recent amendments in Securities Rules, 2011 have empowered the SECP to reduce the FPR ration in terms of mandatory cash requirement while the remaining portion would be allowed to deposit in approved securities with the applicable cut in order to manage the risk posed in leverage positions.
