The Securities and Exchange Commission of Pakistan (SECP) has formed a task force to propose measures to enhance market liquidity.
The task force is comprised of SECP personnel, NCCPL’s and PSX’s management representatives and the TREC Holders. The force recommended a few measures in Deliverable Future Contract (DFC) and Margin Trading System (MTS) so as to improve the stock market’s liquidity.
Based on the recommendation of task force team, the NCCPL management has proposed the following changes in Risk Management Regime of DFC and MTS, including the inclusion of Category B securities in accordance with the new moderate criteria along with the existing eligible securities, which will then be classified as Category A:
The Initial VaR based margins on securities in Category B will be VaR +15%, additional margins should be deposited in the form of 50% Cash and 50% in Margin Eligible Securities.
The proposed increase in margins would provide additional collateral as back-up to NCCPL, in case of closing out or executing delivery in the futures contract written on LIST B securities that have comparatively less liquidity than LIST A securities.
All other Risk Management measures as currently applicable for Category A shall remain applicable on Category B.
Category B securities will be introduced in Margin Trading System with enhanced risk management by amending existing eligibility criteria, mainly covering Impact Cost, Trading history, Average daily turnover, public float, listing history etc. and the following: