KARACHI: The stock brokers are caught between the rock and a hard place! The loss of ready board leverage is shrinking volumes and since the brokers’ livelihood depends to a great extent on the speculators and day traders, the slowdown in income stream is cause for concern.
But the trouble is that 104 brokers had stood up in revolt against the age-old prevalent ‘badla’, CFS or more attractively named CFS Mk-II.
They could not possibly step back and admit that it was a mistake to discard the bad ‘badla’, before introducing an investor-friendly and acceptable alternative.
Ingeniously, the community put their heads together and found the space to wriggle out of the situation.
In all, 21 concerns or defects in the ousted badla have been discovered and with some of the stalwarts among brokers taking the lead, heated debates have produced a refined product that is believed to be shorn of the ingredients of the ‘badla’ that had spoiled the whole product. But no one is calling the proposed new product the ‘badla’ or CFS. Instead the going word is ‘Margin Financing’.
While stock brokers have sought comments and suggestions from the fraternity in regard to the proposed new product, a consultative committee formed by the Securities and Exchange Commission of Pakistan (SECP), under the chairmanship of Aftab Ahmed Diwan, the COO of Central Depository Company of Pakistan (CDC), has also feverishly worked to develop and distribute the contours of its version of a new product of ‘Margin Financing’ (MF).
A senior stock broker conceded that the dip in daily traded volume to 104 million shares (as an example) on Friday was depressing in relation to the 250 million shares traded on a good day in early 2008. But he pointed out that the loser was not just the broker. The slump in volume and trading interest that has dried up liquidity can not have done the capital market any good.
‘It defeats the principal objective of the market, which is formation of capital,’ he said. It was scarcely surprising that though the SECP has been proudly revealing the growing number of companies that register themselves each month, the aggregate number now climbing to 50,000, but no more than one per cent of them have sought listing at the stock market.
‘If the capital market is able to attract no new companies to raise cheaper capital, how will that help to achieve the cherished goal of industrialisation,’ says an analyst.
Another member disputed the notion that it was just the stock brokers who were poorer by the loss of commission due to low volumes.
‘At least four other institutions are taking the heat,’ says he and identified them as government which received just Rs 1 billion in Capital Value Tax (CVT) in financial year 2008-09, compared to Rs4 billion the earlier year. The lack of interest in the equity market also frustrates government’s plan of privatisation.
Others that see their income trimmed include the CDC; the National Clearing Company of Pakistan and the KSE itself. Thus, the desperate search for a new ready board leverage product. Some are questioning the brokers’ fixed gaze on CFS.
‘Why not take a look at the ‘deliverable futures’, which also was thrown out with the badla?’ asks one.
On Friday, the SECP told stakeholders to submit comments by June 25, on the first report on ‘Margin Financing’ released by the SECP’s consultative group on capital markets.
The group had earlier this month submitted its first report.
SECP said it was making effort to develop consensus of the relevant stakeholders on recommendations of the group, which was why it had forwarded the said report for the feedback of various institutions, including State Bank of Pakistan, Mutual Funds Association of Pakistan, Pakistan Banks Association, Investment Banks Association of Pakistan Leasing Association of Pakistan, Modaraba Association of Pakistan, the three stock exchanges, National Clearing Company of Pakistan Limited and the Central Depository Company.
While issuing those directives, the SECP reiterated: ‘The said report contains purely the recommendations of the group and does not reflect the views / proposals of the SECP.’
And the apex regulator said that it would ‘review the recommendations of the group in light of the feedback received from of the stakeholders.’
A stock broker said on Friday that the overwhelming concern of the investors at the stock market was not in regard to the product that might finally find its way into the market (the one proposed by the group of brokers or that of the consultative committee or both). But the big worry was, whether a consensus could be achieved of all stakeholders and more importantly by when?
No comments:
Post a Comment