KSE ordered to lift floor on 15th

KARACHI-Securities and Exchange Commission of Pakistan (SECP) has directed the Board of Directors of Karachi Stock Exchange (KSE) to remove the floor mechanism on December 15, 2008.
This was stated by the SECP Chairman, Razi-ur-Rehman in a meeting held on Friday between the Board of Directors and representatives of SECP at the SECP office in Karachi, a source who attended the meeting said.
Though, the SECP has not formally announced the date of floor removal but the SECP Chairman had verbally directed the representatives of KSE to remove the floor on Dec 15, 2008 in the meeting.
However, on the other hand the Board of Directors of KSE has proposed to the Chairman of SECP to further continue the roll over of Continuous Funding System (CFS) contracts till next three to six months and interest rate on CFS counter should be equalised with the Karachi Inter-Bank Offered Rate (KIBOR),the source added.
The source said that the Board of Directors of KSE also proposed to the Chairman SECP to hand over holdings at the CFS counter to the fund financiers.
The source said that the SECP had also invited the representatives of banks, mutual fund industry and NCCPL in the meeting to reach a conclusion acceptable to all the stake-holders.
The representatives of the banks, mutual fund industry and NCCPL have reviewed the proposals and concerns of the Board of Directors of KSE regarding the removal of floor.
The source said that both regulators have failed to draw any conclusions at the meeting about the removal of floor and the proposals put forwarded by the Board of Directors of the KSE.
The source said that SECP and Board of Directors of KSE would again meet on Saturday (today) to review the proposals in the light of the decisions taken by the CFS fund financiers and to finally reach to a date of floor removal, which will be acceptable for both regulators.
The market regulators were still working on a pathway for providing a soft lending to the market when the floor is finally lifted.
However, the Board of Directors of KSE have a fear that SECP would formally announce the date of floor removal on Saturday, whether the proposals are accepted or not, they said.
At current there is worth Rs 11 billion holdings placed in CFS market.
The members of KSE were of the view that the CFS financiers would not have to bear losses in case they own holding in CFS instead of asking for recovering their funds stuck-up in CFS market, as CFS financiers had already received cash or collateral worth 25 per cent of total holding of Rs 11 billion on CFS counter.
Brokers said that several brokers of the stock market were highly under pressure due to the mark-to-market losses and ,added, if the govt does not accept the proposals of the KSE, the current crisis in the stock market will go from bad to worse after the removal of floor rule.
The brokers said that buyers have became cautious after realising that Rs 20 billion would not be injected into the stock market, as a result of which chaos and tension in the stock market had further increased.