Financing Product: Amendment to the NCCPL Regulations
ISLAMABAD: In another significant development, the Securities and Exchange Commission of Pakistan (SECP) has approved amendments to the National Clearing Company Pakistan Limited (NCCPL) Regulations 2015 to introduce reforms in the Margin Financing (MF) product, which allows securities brokers to provide financing to their customers in a regulated manner.
The regulator has approved the amendment that allows brokers to finance the product.
These improvements will make it easier for investors who want to engage in leveraged trading and require financing to purchase stocks to do so. As a result of these reforms, position and exposure limitations have been liberalized to allow for additional liquidity.
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The MF facility will now be available to investors against their net purchases at the end of the Deliverable Futures Contracts period, making it easier for investors to complete their settlement commitments in the futures segment and decreasing settlement risk even further.
Furthermore, in order to address the funding needs of investors, the MF facility will now be accessible on T+1 against their net purchases in the Ready Market segment.
Additionally, they can now collect MTM losses in any manner mutually agreed upon under the financing agreement signed with the borrower, as opposed to the previously stated mandatory collection of MTM losses in cash only in the event of a 5% decrease in the MF funded asset value.
Furthermore, SECP will allow those who meet the stipulated eligibility standards to pledge 75 percent of the MF-financed securities in favor of NCCPL in order to meet the margin requirements against Ready Market exposure.
Finally, it will also permit MF financiers to release an MF transaction and roll over with a revised MF transaction value after compensating for MTM losses and any payment received from their investors.
The regulator had accepted the aforementioned revisions after careful analysis of any incremental risks and the installation of relevant risk mitigation features. They finalized amendments as a consequence of extensive stakeholder consultation.
