As part of its continued endeavors, the National Clearing Company of Pakistan Limited (NCCPL) has successfully implemented various risk management provisions for the Custodian Clearing Members (CCMs) with effect from September 29, 2021.
NCCPL has proposed and taken various measures to strengthen the risk management framework with an objective to prudently manage and mitigate the risks without imposing any undue burden on the securities market participants.
These developments in the risk management framework are expected to have a significant, positive impact not only on the trading capacity of the Securities Brokers (SBs), executing trades and transactions on behalf of clients of CCMs, but also on mitigation of the overall settlement of risks. Moreover, the CCMs will also be included in the risk management framework.
Previously, CCMs were responsible only for settlement of their foreign/local investors trading by using NCCPL’s Institutional Delivery System, whereas, for risk management, SBs were responsible for the deposit of all margins and Mark to Market (MtM) losses requirements of NCCPL that are withheld until completion of settlement by CCMs.
With the recently implemented reforms, CCMs shall be responsible for depositing the applicable margins and MtM losses to NCCPL in the form of acceptable Market Collateral.
NCCPL acts as a central counterparty between the transacting parties to guarantee the settlement of transactions executed at the Pakistan Stock Exchange Limited (PSX). In order to efficiently perform this role, NCCPL also performs the risk management functions for trades and transactions that are executed at PSX.