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PSX proposes CCPF revamp: longer contributions, higher payouts & broker limits

PSX to increase circuit breakers to 10%
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April 23, 2024 (MLN): The Pakistan Stock Exchange Limited (PSX) has proposed amendments regarding the Centralized Customers Protection Compensation Fund (CCPF), including extending the expiry date for levy contributions, enhancing the per-claimant disbursement limit, and introducing a per-broker limit.

The local bourse has also invited Public feedback on these proposals.

1) Enhancement of per-claimant disbursement limit and introduction of per-broker limit under Centralized Customers Protection Compensation Fund Regulations of PSX

Based on the relevant rules and regulations, disbursement of up to Rs500,000 is permitted to be made to each approved claimant of a defaulted or forfeited securities broker from CCPF in case of shortfall.

In the interests of affected customers of a defaulted securities broker, PSX is proposing to apply a dynamic approach when it comes to disbursing funds from CCPF.

According to the proposal, the existing per-customer disbursement limit is recommended to be enhanced from the existing maximum limit of Rs500,000 to Rs700,000. Besides, the per-broker limit of Rs35 million is also proposed to be introduced.

At first, the per-customer limit of Rs700,000 would be applied. If the aggregate amount to be disbursed based on the per-customer limit is below Rs35m, then the differential amount would also be disbursed to the approved claimants.

If the differential amount is insufficient to settle the remaining claims fully, then the same shall be paid on a pro-rata basis.

However, where the aggregate amount disbursed based on the per-customer limit is above PKR 35 million, the per-broker limit of Rs35m shall not be applicable.

2) Extension of the expiry date for the contribution of levy in the PSX's Centralized Customers Protection Compensation Fund at the reduced rates and consequential continuation of Schedule of Regulatory Fee

The document discusses the extension of the expiry date for the contribution of levy to the CCPF at reduced rates, along with the continuation of the Schedule of Regulatory Fee.

The proposed extension of time requires consequential amendments to the PSX Regulations, changing the year from 2024 to 2027.

With effect from April 16, 2021, the levy collected from the securities brokers was required to be contributed to the CCPF at the rate of Rs0.05 per Rs100,000 value of trade as specified in Schedule-I of Chapter 24 of PSX Regulations.

The rates of contributions to be made in CCPF from the levies collected from securities brokers on their executed trades are mentioned in the table below.

S.No Market Rates effective from April 16, 2021 Rates effective before April 16, 2021
1 Ready Market Trade 0.05 0.67084
2 Odd Lots Market Trade 0.05 0.93809
3 Deliverable Futures Contract Market – contract 0.05 0.93809
4 Cash-Settled Futures Contract Market – contract 0.05 0.93809
5 Stock Index Futures Contract Market – contract 0.05 0.93809
6 Squaring-Up Market — trade 0.05 0.93809
7 Negotiated Deals Market – transaction Nil Nil
8 Debt Market — Trades Nil Nil

The contribution from the securities brokers at the reduced rates to CCPF mentioned in Column A above was approved by the Securities and Exchange Commission of Pakistan (SECP) for three (3) years i.e. up to April 16, 2024 or such other date as specified by SECP, or in the case of balance of CCPF falls below the amount specified by the SECP, whichever comes first.

The rates of contribution by brokers in CCPF were reduced due to the following factors:

  1. Lesser utilization of CCPF due to lower/nil cases of defaults in recent past;
  2. No outflow from the CCPF on account of Management Fee;
  3. Higher treasury income due to expectations of better interest environment; and
  4. The size of the Fund at that time was over PKR 4 billion, which was higher than the minimum fund size and was entirely sustainable at its current level.

PSX is proposing to continue with the existing reduced rates of levy for contribution in the CCPF for a further period of 3 years i.e. up to April 16, 2027 on similar terms and consequential continuation of Schedule of Regulatory Fee.

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Posted on: 2024-04-23T14:28:18+05:00