KARACHI: A majority of the over 200 members of National Commodity Exchange Limited (NCEL) are faced with the suspension of their membership for not complying with the rules and regulations set by the Securities and Exchange Commission of Pakistan (SECP), Pakistan Today has reliably learnt.
According to well-placed sources, the apex regulator had early this year, set December 31 as a deadline for NCEL members to get a ‘brokerage license’ from the SECP and become active brokers at the commodity exchange. It is should be noted that less than 15 percent of the members are active at the commodity exchange.
The sources pointed out the deadline was fast approaching and was just 22 days away, regardless of which only 54 of the total 212 members had complied with the commission’s orders with the remaining 158 facing ‘serious’ punitive action by the regulator.
“I am sure the remaining members would also comply as that know the non-compliance might bring serious consequences for them,” official sources at SECP told Pakistan Today. They said the SECP’s move was aimed at protecting the interest of the investors through registering all of the members as brokers. However, members particularly non-active ones are resisting on account of the registration fee set at Rs 0.1 million earlier this year by SECP.
“Although the Karachi Stocks Exchange has long been in the grip of a lingering dispute over the issue of a member chairman, its sponsored agency NCEL has also descended into controversy over the issue of registration fee,” the sources at KSE said.
They added that the members were not ready to pay the exorbitant charges given their limited profits at the country’s largest and but only half-active commodity and futures exchange. “Of the 212 member, only 15 percent are active at the exchange which is still not functioning at full capacity… the members say they don’t have the money to pay the fees,” the sources said.
“They are even asking us, the non-active members, to pay Rs 0.1 million as registration fee which is exorbitant,” said the member requesting not to be named. The SECP moved and called an emergency meeting at KSE here on Tuesday at 4pm. The sources privy to the meeting, which had a very low turnout, told Pakistan Today that the members had agreed to pay not more than Rs 25,000 to the NECL.
“They (members) have sent their recommendations to the SECP maintaining that they would offer only Rs 25,000,” the sources said. The SECP officials, however, refrain from calling the regulatory matter a dispute pointing out that the “fee structure” was part of the federal government’s rules and were, therefore, not negotiable.
They warned that any defiance on the part of NCEL members was likely to cost them their membership at the commodity bourse. “They have to get the brokerage license before December 31,” said an official. The market sources, however, hold a different view and claim that the “inefficient” management of NECL was spending more against its limited earnings, a fact that had led to shortage of funds with the exchange.
They went on to claim that the exchange was facing financial crisis so serious that it was not able to pay salaries to its employees. “The SECP should take some concrete and sustainable measures… like if the present inefficient management cannot run the exchange, let’s merge it with the KSE,” they suggested.
But the situation at NCEL may not be as bad because trading volumes are hitting new heights. During the last month, total traded value at NCEL reportedly amounted to Rs 35 billion whereas the total number of contracts traded crossed the per-month level of 100,000 for the first time.
Also, during the month a record number of brokers were seen active at NCEL with the Clearinghouse Settlement Guarantee Fund crossing the Rs 300 million mark, marking a growth of 44 percent in activity at the exchange. NCEL is the country’s first and only demutualised exchange with 100 percent institutional shareholders, including National Bank of Pakistan, Zarai Taraqiati Bank Ltd, Pak-Kuwait Investment Co. and three bourses of the country.
