NCCPL amends regulations to improve liquidity, enhance trading capacity

Mar 03, 2021: National Clearing Company of Pakistan (NCCPL) Regulations has introduced certain amendments in its regulations in order to enhance the trading capacity of market participants and improve liquidity.

The amendments were made for discontinuing the 10% additional margins being collected from brokers and the 10% additional haircuts being applied by NCCPL on margin eligible securities (MES), and revision in slabs of liquidity margins, which would now be applicable only on large exposures of brokers, according to annual report issued by Security Exchange Commission of Pakistan (SECP).

In addition, the security deposit requirements have been reduced.

The pool of eligible collateral against margin requirements has also been increased and methodology for calculating haircuts on PIBs was prescribed for acceptance as MES and GOP Ijarah Sukuk has also been included in the list of MES, the report added.

Further, the eligibility criteria of MTS-eligible securities has been revised for selecting from the top 200 securities instead of 100 securities.

The annual report said that the regulatory framework of PMEX was scattered in multiple set of regulations and with the introduction of the Futures Market Act, 2016, the Companies Act, 2017 and related developments necessitated a review of regulations of PMEX to align it with the statutes and to compile all regulatory provisions in one set, thereby removing redundancies and ensuring harmonization within different regulatory requirements.

Therefore, a single document wherein all the regulations of PMEX have been compiled was introduced as the PMEX Rule Book.

In order to encourage new issuers to tap the capital market, safeguard the interest of the general public, shift towards a disclosure-based regime, promote the listing of debt securities and make the IPO process more efficient, various amendments have been introduced in the Public Offering Regulations, 2017.

Through these amendments, the eligibility criteria for the listing of companies have been reviewed in order to enable those issuers to raise funds that have a track record of less than three years and have no profitability during the last two years.

Further, the requirement of audited accounts has been reduced from 5 years to 2 years and certain parameters for greenfield projects have been introduced.

An exit offer mechanism has also been introduced for the protection of the interest of investors.

Besides, through these amendments book-runner has been allowed to waive the margin requirement of the institutional investors including foreign investors and the scope of disclosures in the offering document has been enhanced.

Further, to increase retail and institutional participation, in the capital market by expanding the universe of marginal eligible securities and making government securities a more lucrative form of investment, CDC after thorough consultation with the Commission and NCCPL, effective February 06, 2020, has devised a mechanism for allowing TREC holders & their clients to pledge their government securities as margin against their equity trades.

This would allow the TREC holder & their clients to have provision to replace pledged securities by pledge release through NCCPLas well as re-pledge other government securities. An added benefit of this proposed mechanism is that the beneficial ownership will remain with investors who will continue to receive coupon payments in their IPS accounts.

In the same context, the custody fee on Government securities charged by CDC has also been abolished.

APP