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NCS launched: NCCPL offers custodian banking to stock investors

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22 replies to this topic

#1
ahmedkhan

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    The National Clearing Company of Pakistan Limited (NCCPL), which provides clearing and settlement services to the country''s three stock exchanges, launched Thursday the National Custodial Services (NCS) for the capital market investors.

    In a bid to further strengthen the efficiency, transparency and convenience of capital market operations, the NCS provides an option to investors to directly settle their trades and transactions with the NCCPL and also maintain the custody of the securities and cash with NCCPL while they can continue to execute trades and transactions in the capital market with the Trading Right Entitlement Certificate ("TREC") Holder(s) of their choice.

    The NCS operates through a user-friendly web based module accessible to an NCS client.

    The press launch of the service was attended by Chairman NCCPL Board Nadeem Naqvi and NCCPL CEO Muhammad Lukman.

    "Such a model offering security and transparency to investors is, the need of the hour," said Naqvi.

    He said the growing interest of investors in capital market, driven by attractive returns, limited availability of alternate investment opportunities and reduction in the returns offered by money market instruments indicated the need to develop options like NCS.

    Under NCS, he said, the custody of the securities and cash could be maintained by a separate entity, NCCPL, to further strengthen the efficiency and transparency of the capital market operations.

    Lukman said: "The capital markets in Pakistan have great potential to attract investment and provide competitive returns.

    However, the chief executive said, providing an efficient and transparent operating process was essential for the continued development of the capital market.

    The NCS was an effort made by NCCPL to add to the effectiveness of the capital market operations, he added.

    "It offers safe custody of investors'' cash and securities in a cost effective manner and facilitates the TREC Holders by providing relief in margin and capital adequacy requirements," Lukman said.

    NCS, he said, was an investor-oriented service with complete focus on providing the desired level of confidence and security as well as convenience required by an investor while making investment decisions.

    "I hope that NCS would play a vital role in attracting new interest and retaining existing investors of the capital market," said the NCCPL chief.

    Detailing NCS''s subscription process, Lukman said investors could apply to subscribe to NCS by submitting an NCS Account Opening Form for admission as NCS eligible client of NCCPL, UIN Information System ("UIS") Account Opening Form to perform activities and to view online reports pertaining to NCS and CDS Account Opening Form to open and maintain CDS sub-account with NCCPL.

    Clarifying that the new service would not hamper the investor-broker trading relationship, he said the TREC Holder would open a trading account for NCS client for trading in the stock market. TREC Holder would place orders in the market as per the instruction of NCS client.

    Trades which are executed within the limit of securities and cash balances would be settled directly by the NCCPL.

    Illustrating, the NCCPL chief said once an investor completes all account opening formalities with the company and broker, they place Rs 100,000 with the former.

    The investor then asks broker to purchase stock "A" for Rs 50,000 at market price and then instructs NCCPL through UIS Account to display availability of Rs 50,000 to the broker.

    The broker then checks availability of Rs 50,000 through NCCPL and executes the trade as instructed by the investor.

    On settlement day, NCCPL settles the trade by debiting Rs 50,000 in investor''s account and receiving respective shares of stock A on behalf of the investor which is kept in NCCPL''s custody in NCCPL''s sub-account with CDC; investor has cash Rs 50,000 and shares A worth Rs 50,000 both under custody of NCCPL. In case investor wishes to sell the shares A, the reverse cycle will apply.

    The NCS, the two officials said, would offer many benefits to investors that mainly include net settlement of trades directly with NCCPL, safekeeping of securities and deposits, hassle-free bookkeeping and reduced administrative work, deposit and collection of funds through online banking channel, competitive returns on cash balances and direct collection of capital gain tax.


    Copyright Business Recorder, 2015


    #2
    octopus_2

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    Good step!
    Brokers however might not be happy with it lol

    #3
    ahmedkhan

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    View Postoctopus_2, on 11 April 2015 - 02:44 PM, said:

    Good step!
    Brokers however might not be happy with it lol

    I see two problems first of all if the NCCPL can take all the load as efficiently as brokers do and other thing is broker cooperation. This is one of the step that SECP was planning and made many broker Upset as brokers were minting lots of profit on the Trader account which they might loose as NCCPL will give it to the NCS account holder. But for retails investor it is good option specially after KASB Saga.

    #4
    octopus_2

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    View Postahmedkhan, on 11 April 2015 - 02:53 PM, said:



    I see two problems first of all if the NCCPL can take all the load as efficiently as brokers do and other thing is broker cooperation. This is one of the step that SECP was planning and made many broker Upset as brokers were minting lots of profit on the Trader account which they might loose as NCCPL will give it to the NCS account holder. But for retails investor it is good option specially after KASB Saga.

    I agree and this step sure will help investors regain the confidence after the kasb scandal

    #5
    octopus_2

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    Though i feel this process isnt easy as it seems

    Edited by octopus_2, 11 April 2015 - 03:23 PM.


    #6
    naveedmalikca

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    Small Investor welcomes it but neither Big B nor the broker like it,






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