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::::::::CDC’s
quest to promote Capital Market:::::::::
MoU
Signed with ‘The Financial Daily’ & KSE for publication on
Pakistani Capital Markets
Central
Depository Company (CDC), The Karachi Stock Exchange (Guarantee)
Limited (KSE) and The Financial Daily (TFD) signed a Memorandum
of Understanding (MoU) whereby CDC and KSE will sponsor TFD’s
initiative to bring forth a publication on the performance of
Pakistani Capital Markets during 2002-07. The book will highlight
the performance and future outlook of the country’s Capital Market
as well as provide relevant information about investing in the
Pakistani Capital Market to local and foreign investors &
fund managers in a concise and convenient manner.
The MoU was signed on December 14, 2007, at CDC House, Karachi.
Mr. Muhammad Hanif, Chief Executive Officer - CDC, Mr. Azfar Ashary,
Executive Director - TFD and Mr. Adnan Afridi, Managing Director
– KSE signed the MoU.
Mr.
Azfar Ashary, Executive Director – TFD, welcomed the signing of
the MoU saying that it will help in boosting our Capital Markets.
“We believe in highlighting the positives in our country and by
bringing together this publication, we aim to achieve just that.
We appreciate the support lent to us by CDC & KSE and this
agreement is a milestone for all three parties” said Mr. Ashary.
Highlighting the initiatives taken by CDC in the last few years
Mr. Hanif (CEO - CDC) said “We have been at the forefront of the
drive for Capital Market’s development as it is rooted in the
very essence of our function in the market”. Elaborating on CDC’s
efforts, he further said that Investor education has always been
a prime focus for CDC and to achieve this goal, a series of Investment
Road Shows were held to bring investment awareness to the local
as well as international investors. Encouraged by the overwhelming
response from the road shows held in the local cities of Quetta,
Peshawar, Sialkot, Hyderabad, Multan and Sukkur, CDC took the
series across national boundaries to Dubai, Abu Dhabi, London
& New York. The events in London & New York were supported
and appreciated by London Stock
Exchange, Citibank and the Bank of New York Mellon, which is a
testimony of the international recognition of CDC’s efforts towards
market development. He said that the publication of this book
will go a long way in augmenting CDC’s efforts to project Pakistani
Capital Market as a lucrative market for investment. He also mentioned
that CDC plans to hold more international Road Shows in the near
future.
Mr.
Afridi, Managing Director (KSE) said that it is an excellent opportunity
to showcase the exceptional growth of our Capital Market in the
last few years to the international institutional investors. He
said that there is immense potential of growth in our Capital
Market and it offers attractive returns in comparison with the
other markets. He informed that the Exchange is undergoing a developmental
phase to cope with the emerging challenges of globalization and
also has plans to introduce new products in the near future to
offer investors a broader range of instruments to suit their specific
needs. As a stepping stone for future collaboration in new endeavors
of market development, the parties expressed hope that the dissemination
of this book would aid the country’s Capital Market in attracting
more investments by making both local and foreign investors aware
of the promising developments in the market.
:::::::::Automated
process to facilitate Corporate Action Entitlement against CFS
Blocked Shares:::::::::
CDC has recently introduced an automated mechanism to facilitate
distribution of entitlements on CFS securities held in Financier
CFS blocked accounts to Financees. This enhanced system capability
would help Issuer companies to credit / issue corporate benefits
directly to CFS Financees on a timely basis, which is critical
during times of uncertain market conditions. To give an overview
to member stock exchanges about how this mechanism would work,
CDC has conducted training sessions in all three stock exchanges
of the country.
Background:
Following the implementation of CFS account as per CFS Regulations,
all CDS Participants / Account Holders who are Financiers in CFS
are required to open a separate CFS Participant / Account Holder
Account to keep CFS financed securities separately. Transfer of
securities from CFS accounts is restricted and securities could
only be moved out at the time of reversal at initial CFS trades.
In the event of corporate action, entitlements due on CFS securities
were credited /issued to these blocked accounts and subsequently
entitlements were required to be transferred by the Financiers
to the Financees in collaboration with the stock exchanges through
a manual process.
Considering the issues relating to recovery of the shares and
risk associated with manual process of recovery and delivery of
these entitlements to the original beneficiary (Financee), CDC,
NCCPL and KSE jointly prepared the procedures to facilitate automated
handling of corporate actions against securities held in CFS blocked
CDS accounts, which were then approved by the SECP in September
2007.
The
New Mechanism:
As
per the procedures, all the corporate entitlements (Cash / Stock
Dividend, Rights and attendance of AGM / EOGM) are directly delivered
to the Financees CDS account on the basis of data uploaded by
NCCPL during the end of day process on the day before the commencement
of Book Closure period. Subsequent to the Book Closure, the same
securities are transferred back to Financier account. The entire
process is completed through an automated mechanism. The movements
of securities between accounts are reflected in account activity
report.
Through this mechanism, the shareholders (Financees) can now get
their entitlements directly in their own name with convenience.
:::::::::Element
Training Program 2007:::::::::
CDC hails its elements as key partners in transforming the mechanism
of custody and settlement from a rudimentary system to the current
state-of-the-art electronic system. This transformation has been
made possible through close coordination of CDC with its elements.
In order to continuously keep its partners abreast with the recent
developments in the CDS and also to provide them with a forum
to voice their concerns; CDC has set a tradition of holding Element
Training Programs.
Considering the benefits of the previously held training programs,
CDC hosted the 4th Training Program of this series in Karachi,
Lahore and Islamabad in October-November, 2007. The participants
of the training program included CDS Participants as well as Pledgees
and Issuers/RTAs (Registrars/Transfer Agents).
The Element Training Program (ETP-2007) has proved to be beneficial
in two ways. Firstly, it has provided a great opportunity to make
CDS elements better understand their role & responsibilities,
share knowledge and exchange information. Secondly, this forum
has helped CDC in identifying many common challenges across the
market and gain a better understanding of the issues CDS elements
face in their day-to-day functions with reference to CDS.
The program provided an overview of the role and responsibilities
of respective elements as well as new policies and enhancements
in CDS. It also threw light on the maintenance of accounts in
different capacities with CDC, audit guidelines, security issues
and gave general suggestions about these matters. The training
panel consisted of knowledgeable officials from all the relevant
departments of the Company to cater to the issues relating to
their areas of expertise and to note down the recommendation for
improvements highlighted by the training participants. Another
important feature of the program was the booklet distributed among
the trainees to be used as reference material. Moreover, certificates
of participation were also given to the attendees of the training
sessions.
:::::::::Measuring performance:::::::::
Research
on Market Awareness and Customer Satisfaction
CDC has been committed towards providing secure, reliable and
cost effective solutions for the development of Capital Market
in Pakistan since it started operations 10 years ago.
Now,
after a decade of operations & ongoing marketing efforts,
CDC has become a recognized brand in spite of its complex nature
and the difficulty involved in understanding its basic function.
In order to assess the impact of its efforts and persistent commitment
towards the development of Capital Market in these years and to
find out the level of satisfaction of its existing customers,
CDC has engaged a renowned research agency to conduct an independent
research on brand awareness and customer satisfaction..
:::::::::CDC
second-to-none in Trustee and Custodial Services::::::::::
The Company maintained its status as ‘the most preferred
trustee’ during the current year as well as it continued to enjoy
the position of market leader, which can be assessed from the
fact that out of total 86 mutual funds in the market, 72 are availing
Trustee and Custodial Services from CDC.
Moreover,
out of the six assets management companies authorized by the SECP
to launch the newly introduced Voluntary Pension Schemes (VPS),
four have appointed CDC to act as their trustee.
CDC’s
Trustee Operations have achieved tremendous growth and demonstrated
their potential for further growth by keeping abreast with the
developments in the mutual fund industry. During the year, 26
new mutual funds and 4 Voluntary Pension Schemes joined CDC. The
overall fund size under CDC Trustee and Custodianship has increased
by 143%, i.e. from Rs. 92.9 billion to Rs. 226.4 billion.
Following
statistical details show the operational performance of CDC’s
Trustee & Custodial Operations:
:::::::::NOTICE
BOARD:::::::::
Advance
Collection of Fresh Issue Fees:
against invoices issued by CDC based on ‘number of sharesÊto
be credited’ for Bonus Issues, Mergers, De-mergers, Splits and
Consolidations, whereas in case of New Issues and Right Issues
a provisional invoice is issued for an approximate number of securities,
which is rationalized after the final credit of shares. Moreover,
clearance of any previous outstanding dues is necessary before
credit of shares.
In order to streamline the process of credit of Fresh Issues in
CDS, CDC Management has decided to collect the Fresh Issue Fee
with the application for the issue (with effect from October 25,
2007). In this regard, payment has to be made.
Amendments
in CDCPL Regulations
Amendments have been made in CDCPL Regulations published in the
official gazette of Pakistan dated August 29, 2007, pertaining
to the following:
- Securities
transactions involving GDRs as Prescribed Securities Transactions
- Regulation 2.11.1
- Removal
of error with regards to pledge of book-entry securities - Regulation
11.1.2
- Submission
of Book Closure Notice to CDC - Regulation 12.1.1
- Rejection
of Valid Deposit Requests in case of Suspension of CDS Eligibility
of securities - Regulation 5.4.1
The
relevant circular has been updated on CDC website www.cdcpakistan.com
for your ready reference.
Effects
of Suspension & Revocation of CDS Eligibility of a Security:
In order to safeguard the interest of the Capital Market in general
and investors in particular, CDC has a comprehensive legal framework
to regulate CDS Elements. Eligibility of Securities for CDS requires
consistent adherence to the CDCPL Regulations by the Issuer, failing
which can result in Suspension and finally Revocation of the CDS
Eligibility of such securities. In this regard, proper notices
are issued and disseminated by CDC as per the requirement. Details
of the notices and the impact of Suspension and Revocation are
mentioned below:
- Notice
of Intention of Suspension - Issued where the Issuer fails to
comply with applicable clauses of the CDCPL Regulations. The
notice contains the reason and intended date of Suspension as
well as the conditions to be met in order to avoid Suspension
of the CDS Eligibility of the securities of the Issuer.
- Notice
of Removal of Intention of Suspension - Issued where the Issuer
fulfills the conditions mentioned in the Notice of Intension
of Suspension before the intended date of Suspension. It announces
that the said Notice of intention of suspension has been removed.
-
Notice of Suspension - Issued where the Issuer fails to fulfill
the conditions mentioned in the Notice of
Intension of Suspension, by the intended date of Suspension.
It announces that the CDS Eligibility of the security in question
has been suspended with effective date of suspension with consequential
impact.
Impact
of Suspension:
-
Only new Deposit Request Transactions of the security
under suspension is restricted.
- All
other functionalities including Free Deliveries, Withdrawal
and Pledge of the securities remain available.
-
Beneficial owners of the securities will continue to receive
any corporate entitlements pertaining to that security.
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- Notice
of Removal of Suspension - Issued where the Issuer fulfills
the conditions mentioned in the Notice of Suspension, stating
that CDS Eligibility of the Issuer has been restored.
If suspension of the CDS Eligibility of any Eligible Security
of an Issuer continues for 60 Business Days, CDC shall revoke
the CDS Eligibility of the Security with effect from the 60th
Business Day of suspension.
- Reminder
Notice - Issued where the Issuer fails to fulfill the conditions
mentioned in the Notice of Suspension after 45 business days
of the date of Suspension. It reminds the Issuer of the intended
date of Revocation of the CDS Eligibility of the securities
in question, with the advice to meet the conditions to avoid
the revocation.
-
Notice of Revocation - Issued where the Issuer fails to fulfill
the conditions mentioned in the Notice of
Suspension after 60 business days of the date of Suspension.
It announces that the CDS Eligibility of the security in question
has been revoked with effective date of revocation.
Impact
of Revocation:
-
A Beneficial Owners Report and an Eligible Pledgees Report
are prepared to ascertain the available balance of book-entry
securities of each holder. These reports are then forwarded
by CDC to the relevant Issuer for issuance of physical
certificate in lieu of book-entry securities.
- Upon
receipt of the physical certificates from the relevant
Issuer, CDC dispatches these certificates to their beneficial
owners.
-
All book-entry securities entered in Accounts and Sub-Accounts
are cancelled by CDC at the Revocation Time mention in
the notice of revocation.
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In
case of Redeemable Securities like TFCs, the security is Revoked
after the relevant Issuer has redeemed the securities.
Protection
of RSA Secure ID Token
Confidentiality
of customers’ information and security of the Central Depository
System are matters of utmost concern for CDC, therefore it keeps
on taking measures to protect the Central Depository System (CDS)
from unauthorized access. The recent introduction of Two-Factor
Authentication Mechanism involving a PIN code and an RSA Secure
ID Token was another step to strengthen the login mechanism.
The
cooperation of CDS users is of essence in ensuring only authorized
access to the Central Depository System. Therefore, CDS users
are once again requested to keep their RSA Secure ID Token in
safe custody and keep their PIN code secret for their own safety.
Progress
in Updating UIN in CDS
As per the instructions of SECP, all individual account holders
are required to input the new CNIC number in replacement of old
NIC in e-CDS to be used as UIN. Similarly for non-individual entities,
Registration number or the number assigned by NCCPL is to be used
as UIN for identification under such requirement.
For Old NICs, the task was initiated in December 2006 when total
figure of old NIC appearing in registration details was carried
out to be 36,765 IAS/Sub-accounts (including Suspended Participants).
Likewise for Registration numbers, the process was initiated in
June 2007 when non-individual IAS/Sub-accounts without UIN were
5,205 (including Suspended Participants).
Close co-ordination with CDS Participants resulted in remarkable
achievement. The above mentioned figure as on January 29, 2008
reduced to just 1,759 IAS/Sub-accounts for old NICs. Similarly,
incase of Registration numbers only 65 IAS/Sub-accounts are appearing
on same date non-compliant which mostly comprised of sub accounts
under Suspended Participants. All such non-compliant accounts
have been blocked by CDC and no further transaction can be made
through these accounts.
:::::::::CDS
UPDATES:::::::::
Reason
Code Filter in Inter & Intra Account Free Delivery Reports
A new search filter in Intra and Inter Account Free Delivery (FD)
report screens in CDS has been introduced. This feature enables
the user to generate reports based on the filtering criterion
of Reason Code as well. The Reason Code is also available in the
report outputs for Intra and Inter FD reports, and Inter Participant
FD download.
Additional
Information field in Account Setup screen
Keeping in view that CDC Participants are required to define additional
details of their clients in the account title field, a new 90-character
field has been introduced in the Account Setup Screen in CDS.
Participants can now input additional details of their client
such as codes, agent reference or any other prefix and suffix
required for identification purposes in addition to ‘Account Title’
in the relevant field. All existing Sub-Accounts having additional
information in Account Title field, should be regularized by moving
all other supplementary references to this new additional account
title field.
The new field would also be displayed in the Intra Account Movement,
Transfer of Holdings and Account Setup functionalities screens
as well as in the relevant reports & download of Account Setup
Report and Intra Account FD Report.
Introduction
of Validation Check on NTN Field in Account Setup
Providing reliable and transparent information to all its clients
has always been CDC’s first priority. Keeping in view the fact
that National Tax Number only comprises of numeric digits, validation
check has been introduced in the Account Setup Details in CDS.
With this check in effect, NTN field will not accept charactersÊother
than numeric digits. Moreover, the System will not allow updates
in account details unless NTN field is correctly filled or otherwise
cleared out. This change would further minimize the chances of
human error while entering information in the system and would
also improve the reliability of information available to all CDS
Elements.
:::::::::IN
FOCUS:::::::::
International
Securities Identification Number (ISIN)
To identify Securities worldwide, they are assigned unique identification
numbers, known as the ISIN (International Securities Identification
Number). The ISO 6166 standard provides a uniform structure for
the ISIN number that uniquely identifies securities. It is a 12
digit alpha-numeric code that serves for uniform identification
of a security for use in any application in the trading and administration
of securities in the international securities industries. Securities
for which ISINs are issued include equities, bonds, commercial
papers and warrants. ISIN identifies the security, not the exchange
on which it trades; it is not a ticker symbol. For instance, DaimlerChrysler
stock trades on twenty-two different stock exchanges worldwide,
and is priced in five different currencies; it has the same ISIN
on each.
ISIN
consist of a total of 12 characters divided into three parts:
a two letter country code, a nine character alpha-numeric national
security identifier, and a single check digit. The country code
for the country of issue is issued in accordance with the ISO
3166. International securities cleared through Clearstream or
Euroclear, which are Europe-wide, use "XS" as the country
code. The country code of the Securities issued in Pakistan is
“PK”.
The
nine-digit security identifier is the National Securities Identifying
Number, or NSIN, assigned by governing bodies in each country,
known as the National Numbering Agency (NNA). NNA for Pakistan
is Central Depository Company of Pakistan Limited (CDCPL). In
the United Kingdom and Ireland the NNA is the London Stock Exchange.
In countries where no NNA operates, a substitute agnecy or regional
NNAs allocates the number..
Association
of NNAs
ANNA is an Association of NNAs, founded in 1992 to provide to
its members and the securities industry, a uniform structure and
guidelines for creation, modification and deletion of ISINs and
CFI (Classification of Financial Instruments) codes. As an approved
registration authority by International Standard Organization
(ISO), its objectives also include the implementation and maintenance
of the international standards ISO 6166 and ISO 10962.Ê
Membership of ANNA has now reached around 100 partners and full
members working toward accomplishment of its objectives.
CDC,
NNA for Pakistan
Prior to its launch in 1997, CDC became a member of the Association
of National Numbering Agencies (ANNA) and by virtue of this, became
the sole National Numbering Agency for Pakistan. Representing
ANNA in Pakistan, CDC issues ISIN to standardize identification
of local securities for trading and settlement in Pakistan and
abroad.Ê Following the guidelines of ANNA, ISIN are allocated
to national securities in the following fashion:
For Example, the ISIN for Buxly’s Paints Limited is broken down
as follows:
Functioning
as a Numbering Agency for securities in Pakistan is another dimension
of CDC that reflects its concern and importance for the development
of the Capital Market in the country.
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Capital Market Lookup |
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Major
Economic Indicators of Pakistan |
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Securities
Joined CDS this Quarter |
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Securities
Revoked / Delisted from CDS this Quarter |
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Securities Declared Eligibe
for CDS this Quarter |
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Breakup
of Securities in CDS |
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CDS
Summary |
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Investor
Accounts Statistics (Mar 31, 2006) |
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Corporate
Actions Handled During this Quarter |
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Summary
- Trustee & Custodial Operations |
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