The Securities and Exchange Commission of Pakistan (SECP) constituted a Committee with the mandate to review the matter of in-house financing and to provide recommendations for viable solutions to cater needs of market participants in relation to financing by Brokers to its clients. Accordingly, such Committee had submitted its report to SECP and proposed few changes which also included recommendations for the enhancement in the existing Margin Financing System (MFS).
The submitted report of the Committee was primarily focused on the reforms to be introduced in the MFS so that banks can provide funding to investors through brokers. One of the core recommendations was to remove the requirement to collect 10% Financing Participation ratio (FPR) in the form of cash from financees and allow deposit entire FPR in the form of securities.
Margin Financed Securities delivered in the CDS sub-account of a client will be allowed to pledge by Broker Margin Financier in favor of bank with which Margin Financing Tri-Partite Agreement has been executed.
Corporate entitlements of Margin Financed Securities are delivered to the Margin Financier who settles such entitlement with Financee as per terms and conditions on MF Agreement. In the revised MFS, Corporate entitlements of Margin Financed Securities shall be delivered to the respective client.
Further to this, in order to enhance the transparency levels, strict monitoring and safe guarding the capital, the clients would open a special sub account to avail the margin financing and pledging of financed securities.
In accordance with the suggestions and recommendation of the Committee, NCCPL has implemented revised features in the MFS effective from Monday, June 19, 2017.