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Margin Trading System (MTS)



37 replies to this topic

#1
NorthStar

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    MTS Rules as per 18 Feb 2011

    "A candle loses nothing by lighting another candle"




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    #2
    NorthStar

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    Main Features

    8. Eligibility criteria for a margin financier. — A person shall be eligible to apply for registration as a margin financier, if —
    (a) such person is —
    (i) a broker;
    (ii) a banking company as defined under the Banking Companies Ordinance, 1962 (LVII of 1962), with a minimum credit rating as specified in regulations;
    (iii) a financial institution covered under section 3A of the Banking Companies Ordinance, 1962 (LVII of 1962) with a minimum credit rating as specified in regulations;
    (iv) an investment finance company licensed by the Commission to provide investment finance services with a minimum credit rating as specified in regulations; or
    (v) such other corporate entity as may be recommended by the authorized intermediary and approved by the Commission;
    ***************************************
    14. Additional conditions applicable to brokers who are margin financiers. — In addition to the provisions of rule 13, a broker which is registered as a margin financier shall —
    (a) provide margin financing by using its own funds or funds borrowed from financial institutions specified in sub-clauses (ii), (iii) and (iv) of clause (a) of rule 8;
    (cool.gif not use the funds of any of its clients for providing margin financing to any other person or for proprietary account;
    © not provide margin financing except through the platform provided by the authorized intermediary;
    (d) not provide margin financing to any client without evaluating the creditworthiness of the client through a proper credit risk assessment methodology; and
    (e) not provide margin financing to any person who is not its client.
    ****************************************
    31. Conditions applicable for pledge of securities. — No broker shall pledge or deposit any security on account of a client as collateral except as provided below, namely: —
    (a) the pledge or deposit is in favour of or with a stock exchange or a clearing company in respect of margin requirements relating to the transactions or trades of such client as required under the relevant regulatory framework;
    (cool.gif the pledge or deposit is in favour of or with a financial institution in respect of margin financing extended by such financial institutions in respect of transactions of such clients under the margin financing facility or any other form of financing as allowed by the Commission;
    © the pledge or deposit is in favour of or with a financial institution to borrow funds, provided that the client has authorized the broker in the manner specified by the Commission; and
    (d) the pledge or deposit is for any other purpose as permitted under applicable laws and regulations, provided the client has authorized the broker in the manner specified by the Commission.
    *******************************************
    33. Broker’s obligations. — (1) In addition to the brokers’ obligations under the Brokers and Agents Registration Rules, 2001, a broker acting on behalf of its clients in any of the leveraged markets or pledging the securities of a client shall ensure that —
    (a) no transaction is executed by the broker on behalf of a client unless an appropriate agreement has been executed between the broker and such client;
    (cool.gif all provisions of the Anti-Money Laundering Act, 2010 (Act VII of 2010) and any rules and regulations made thereunder are complied with at all times;
    © all risks involved in the relevant transactions have been fully disclosed and the broker has obtained a written confirmation from its clients that they have understood and have the ability to bear the risks in such transactions; and
    (d) the options available to a client in respect of various financing facilities in the securities markets have been fully disclosed and explained to the clients.
    (2) The broker shall evaluate the credit worthiness of its clients through a proper credit risk assessment methodology and assign credit limits to each client beyond which the client shall not be allowed to avail financing under margin financing and margin trading.
    (3) A broker shall maintain records in respect of its compliance with the aforesaid obligations and such records shall be open to inspection by the Commission at any time.

    "A candle loses nothing by lighting another candle"




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    #3
    adeel khan

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    Recently KSE board approved the new margin trading system, currently mock sessions are underway and the product is likely to be available before the end of the month. Key features include: * NCCPL (National Clearing Company of Pakistan) will provide MTS in the capacity of an “Authorized Intermediary” to its participants to avail/provide financing in an undisclosed manner

    * There will be approximately 20 stocks eligible in MTS.

    * On settlement date, Fiancée (Borrower) will be required to pay his “Equity participation Ratio” (EPR) which is 25% of VAR (which ever is higher) of the value to pay his EPR i-e the remaining amount the trade on the settlement day.

    * The cost of leverage (MTS rate) will be max of 6mths KIBOR (Karachi Interbank offering Rate) + 8% and will be determine by the market forces.

    * NCCPL will collect M2M losses in the form of cash from Fiancées and pay to respective Trading Financiers on daily basis after the settlement of M T Transactions.

    * 100% Financed Securities will be moved to blocked house account or Sub-accounts maintained by the Trading Financier in a separate CDC Account.

    * Leverage buy orders will be inserted through separate key.

    * MTS Funding will be for a max of 2months. Every fortnight 25% of the funding will be released automatically. Fiancée can release (SELL) his leverage position at any time.

    * For better risk management, MTS imposes member wise and client wise position limits of eligible scrip based on free float. For member, max exposure limits for particular scrip is d20% of its free float or PKR1bn in value whereas for any UIN it cannot have 0.5% of free float or PKR250mn.

    * There are also market wide limits in MTS like the total financing cannot exceed 20% of free float or PKR8bn in value in single MTS eligible scrip.

    * On first default NCCL will suspend UIN and a penalty of 2% of the defaulted amount of such UIN on broker and restriction in derivative markets for period of three months. In case of second default, penalty will be 4% and restriction for leverage market for a period of six months on the broker. However, in case of subsequent default there is permanent restriction as well on the broker.



    #4
    Amin Khan

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    Margin trading to help improve volumes’
    Sunday, February 27, 2011

    ISLAMABAD: Margin Trading System (MTS) will help increase trading volumes on bourses and allow investors to take larger positions on different securities, said the Islamabad Stock Exchange’s managing director.

    “The system will also help generate revenue for the government as well,” Imtiaz Haider said at the MTS inaugural session conducted by the National Clearing Company of Pakistan Limited (NCCPL).

    The officials of the NCCPL gave a detailed presentation on the new leverage product (MTS) and apprised about the procedures of the trading, settlement, and risk management.

    Margin trading would be done in the eligible securities on an undisclosed manner through a platform provided by NCCPL. The list of MTS eligible securities shall be determined in consultation with the stock exchanges.

    For finance risk management, the stock exchanges would collect all margins and month-to-month losses against the leverage buy orders, executed as per their applicable margining regime in any form of approved collaterals.
    Click Here For: "Daily Reports From Different Brokerage Houses"

    #5
    Amin Khan

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    Banks gear up for margin trading from March 7
    By correspondent
    Tuesday, March 01, 2011

    KARACHI: All the major banks falling in the category of eligible financiers have beefed-up and finalised their arrangements to sell their products in the margin trading system (MTS) regime that would be in place at the Karachi share market not later than March 7, sources said on Monday.

    All the arrangements have been finalised following the approval from the Securities and Exchange Commission of Pakistan (SECP) for the launch of the much-awaited leverage product at the stock market.

    The sources said that all the necessary approvals had been obtained and all arrangements have been made and the product would go live this week and surly not later than March 7, unless and otherwise any other bottleneck was put by the government.

    Dealers said the SECP had indicated that the margin trading system would be launched during the first week of March, which should also help investors’ sentiment.

    They said that the margin financing and securities lending and borrowing would also be operational along with the margin trading system.

    The introduction of leverage to the markets is expected to provide the much-needed liquidity to the local bourses that have been without any mechanism for shares financing for more than 21 months.

    After imposing a ban on the homegrown leverage product, popularly known as badla, after the devastation it caused in 2008 crisis, the regulator seems keen to reintroduce the leverage product with some improvements called the margin trading system.

    With 10-year record low volumes witnessed last year, on popular demand a new leverage product is now being re-introduced after the recommendations made by the SECP-constituted committee of independent professionals.

    According to the KSE notice, draft regulatory amendments to cater to the introduction of the margin trading system were approved by the board with minor changes.

    It is now expected that with this approval the new product will be available soon that may provide the much-needed depth to the local market.

    Click Here For: "Daily Reports From Different Brokerage Houses"

    #6
    Amin Khan

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    MTS Presentation

    Click Here For: "Daily Reports From Different Brokerage Houses"






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