1. NCCPL Overview, Functionalities, Control and Check on NCSS by
NATIONAL CLEARING COMPANY OF PAKISTAN LIMITED
4/19/2017

2. The Company’s Overview
4/19/2017

3. BACKGROUND NCCPL – NCSS Design
In March 1999 the Capital Market Project Consultants (Arthur Anderson & Co.) were mandated to develop recommendations for a National Clearing and Settlement System (NCSS).
Accordingly various committees were formed comprising of representatives from the three Stock Exchanges, CDCPL and users.
Based on recommendations submitted by consultants, deliberation of the committees and subsequent approvals from the three Stock Exchanges and SECP, System design was finalized in October 2000.
4/19/2017

4. BACKGROUND Cont…d NCCPL - Incorporation & Implementation
The NCCPL was incorporated on July 03, 2001 to provide Independent Clearing & Settlement Services to all the three Stock Exchanges in Pakistan.
NCSS Live operations were commenced from December 24, 2001.
Initially the company was managed by CDC.
Since July 01, 2005, the Company complete severed itself from CDC and now has his own management.
4/19/2017

5. Organization Structure of NCCPL
C F O / Com.Sec.
Board of Directors
Chief Internal Auditor
Chief Executive Officer
Head of Operations
Customer Support
Karachi
Product Development
Operations
Lahore
Islamabad
Chief Information Officer
Systems Management
Software Management
Network Management
Help Desk
Database Management
Information Security
Business Continuity
Audit Committee
Legal & Compliance
Fin. Dept.
Admin & HR
Pay & Collect
G L Sec.
4/19/2017

6. NCCPL - Legal Frame Work
The operations of NCCPL are governed by the following:
NCSS Regulations 2003;
NCSS Procedures 2003;
Clearing House Companies (Registration and Regulations) Rules 2005; and
Companies Ordinance, 1984
4/19/2017

7. Corporate Governance Board of Directors Code of Corporate Governance
The Board of the Directors comprises of 11 Directors of which 9 are appointed by the shareholders,1 is nominated by the SECP and the CEO by virtue by his office.
Code of Corporate Governance
The Company has voluntarily adopted the Code of Corporate Governance to implement good governance practices. These inter-alia include;
Forming an Audit Committee of the Board comprising of non-executive directors;
Appointment of Chief Internal Auditor, Chief Financial Officer and Company Secretary by the Board;
Holding the number of the Board Meetings as recommended by the Code;
Issue of Quarterly, Half yearly and annual financial statements;
Cont……
4/19/2017

8. Corporate Governance
Circulation of ‘Statement of Ethics and Business Practices’ to establish a standard of conduct for directors and employees of the Company;
Adopting of vision/mission statement and overall corporate strategy by the Board; and
Hold presentation for the orientation of directors, as required by the Code;
4/19/2017

9. Corporate Governance Cont…..
I.T. Steering Committee
The Company also has a I.T. Steering Committee;
deliberate IT related strategies and policies;
Committee Comprising of experts from stock exchange and Financial Institutions.
4/19/2017

10. NCCPL – Shareholding Structure
Authorized Capital
Rs million
Issued And Paid-up Capital
Rs million
SR. #
SHAREHOLDERS
(Rs million)
% OF SHARE HOLDING 01
The Karachi Stock Exchange
47.06% 02
Lahore Stock Exchange
23.53% 03
Pak-Kuwait Investment Corp.
17.65% 04
Islamabad Stock Exchange
11.76%
TOTAL %
4/19/2017

11. Company’s Achievements
Following major achievements have been accomplished by the Company:
Independent management
Registration under Clearing House Companies (Registration and Regulations) Rules 2005 on March 7th, 2006
Appropriation of Rs 100 million as initial contribution towards Clearing and Settlement Fund as required by the above Rules
Formation of Clearing & Settlement Fund Trust
Successful implementation of Unique Identification Number (UIN) functionality on the National Clearing & Settlement System (NCSS)
4/19/2017

12. Company’s Achievements Cont…
Introduction of mechanism for Cash Settled Future Contracts (CSFC) to collect and disburse marked-to-market losses and profit through its NCSS Pay & Collect Functionality
Implementation of Institutions Delivery System (IDS) functionality to Institutions for Clearing and Settlement of their regular trades directly through National Clearing and Settlement System (NCSS)
Modifications in NCSS to facilitate Unified Trading System (UTS) Platform for LSE and ISE members for execution of their trade and transaction on the same unified trading System (UTS).
Establishment of DR/BC site along with Branch Office
4/19/2017

13. Company’s Achievements
Independent IT Set-Up effective from July 01, 2007
Procurement of Server and Hardware
Implement Network infrastructure and connectivity
Establish four Data Centers
4/19/2017

14. Future Projects Following are the major upcoming future ventures
Implementation of CFS MK-II through NCCPL
Risk Management of Financial Institutions
Recording & Settlement of Futures Market Contracts Through NCSS
Establishment of Company’s Owned Head Office
Issuance of Share Capital
4/19/2017

15. Major Challenges Hiring of appropriate Human Resource Space constraint
4/19/2017

16. NCCPL Data Centers Main Data Centre at Head Office in KSE
Business Continuity Site in Karachi
Branch Data Centers at Offices in LSE and ISE
4/19/2017

17. Network Links
Intercity connectivity through 1-MB DXX connectivity through PTCL
First-level Redundancy through Frame Relay link (provided by Supernet)
Second-level Redundancy is available through ISDN lines
All these links are available at Head Office, BC Site, Lahore Office and Islamabad Office
Head Office and Business Continuity Site are connected through Dark Fiber
4/19/2017

18. Remote Access
Clients in KHI, LHE and ISB who do not have offices in KSE, LSE or ISE have the option to dial in to the network of NCC
They have the option to use normal phone lines (56 kbps) or ISDN-BRI lines (128 kbps)
Redundant PRI lines have been provided in each office for remote connectivity
Also, the PRI lines available at Main and BC sites can be used as backup of one another
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19. Business Continuity
Business Continuity site shall be fully functional in July 2007.
All business data shall be copied to the BC site in real time thereby ensuring zero-loss of data.
4/19/2017

20. Network Resilience
In case of unavailability of NCC Data Centre in KSE, the network provides seam less connectivity for KSE with the BC Site of NCC
In case of unavailability of NCC Data Centre in LSE/ISE, the network provides seam less connectivity for LSE/ISE with the Main/BC Site of NCC
4/19/2017

21. System Security
All transactions between Clients and business machines are encrypted through VPN tunnels
All client machines are installed with host-based security software which eliminates any malicious activity as well as protects against viruses, spam, etc.
During next quarter, we plan to provide Digital Certificates stored on Smart Cards to all our clients. These certificates shall be used initially for User and Terminal Authentication, and later on Transactional Non-repudiation will be implemented in NCSS through the digital signatures.
4/19/2017

22. High Availability
Most of the networking equipment has been implemented in highly-available configuration
For example, if one firewall goes down the other firewall continuously provides the protection without any interruption to the business activity
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23. 4/19/2017

24. National Clearing & Settlement System (NCSS) Overview
4/19/2017

25. Major Benefits of NCSS
Cross Exchange Netting for both cash & securities.
Automated Pay & Collect
No physical receipt / issuance of instruments
Automated process of securities settlement directly between CMs.
Settlement of non-broker institutions for CFS transactions directly with NCSS.
cont…d
4/19/2017

26. Major Benefits of NCSS cont…
Settlement of broker to broker transactions directly with NCSS to facilitate transactions of brokers of different exchanges.
Cross Exchange Netting for both cash & securities for CMs who are members of more than one Stock Exchange.
Margin Financing through independent module on NCSS.
Settlement of net obligations directly between CMs as per undisclosed Balance Orders.
Registration of Unique Identification Number (UIN) of all clients with codes
4/19/2017

27. NCSS – Operational Highlights
167,904
192,454
150,767
146,291
126,522
114,944
139,166
124,578
102,235
112,582
126,790
109,341
126770
182,256 -
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
Jan '06
Feb '06
Mar '06
Apr '06
May '06
Jun '06
Jul '06
Aug '06
Sep '06
Oct '06
Nov '06
Dec '06
Jan '07
Feb '07
Monthly per Day Average No. of Trade and Transaction Settlements on NCSS
4/19/2017

28. NCSS - Operational Highlights
141
196
121
126 90 71 76 77 59
100
101 85
135 - 20 40 60 80
120
140
160
180
200
Jan-06
Feb-06
Mar-06
Apr-06
May-06
Jun-06
Jul-06
Aug-06
Sep-06
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Monthly per Day Average of Settlement Volume (Shares in million)
4/19/2017

29. NCSS - Operational Highlights
187,814
297,169
248,363
213,536
206,740
124,727
123,157
146,836
100,866
143,881
182,145
139,851
123,632
230,316 -
50,000
100,000
150,000
200,000
250,000
300,000
Jan-06
Feb-06
Mar-06
Apr-06
May-06
Jun-06
Jul-06
Aug-06
Sep-06
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Monthly per Day Average of Settlement Value (Rs. in million)
4/19/2017

30. NCSS - Operational Highlights Highest Ever
Maximum Number of Balance Orders (BO’s).
Maximum Volume of Shares
Maximum Value of Shares
13,615
314.9 (M)
24.83 (B)
4/19/2017

31. Statistics Active Clearing Members (As of May 2007) Broker 340
Non Broker
Total
4/19/2017

32. No. of NCSS Eligible Securities (as on May 2007)
Statistics
No. of NCSS Eligible Securities (as on May 2007)
No. of Live Securities
527
No. of Securities Eligible for Broker To Broker (BTB) 21
No. of Securities Eligible for Institutional Delivery System (IDS)
No. of Securities Eligible for Margin Financing (MF)
143
4/19/2017

33. No. of Settling Bank / Branch Setup (as on May 2007)
Statistics
No. of Settling Bank / Branch Setup (as on May 2007)
Bank
Karachi
Lahore
Islamabad
Total
Allied Bank Limited 1 3
Bank Al-Falah Limited  1
Bank Al-Habib Limited
 -- 2
Habib Bank Limited
-- 
KASB Bank Limited
MCB Bank Limited
Metropolitan Bank Ltd. --
PICIC Commercial Bank
MY Bank Limited
United Bank Limited
Atlas Bank Limited
JS Bank Limited
TOTAL 12 6 4 22
4/19/2017

34. 4/19/2017

35. Types of Trades/Transactions on NCSS
Exchange Trades and Transactions
Exchange Trades are
Locked-in contracts between broker CMs executed through Exchange trading system in the Regular Market
Exchange Transactions are
Locked-in contracts between broker CMs executed through Exchange trading system in the Continuous Funding System (CFS) Market.
Net-buy or net sell position of broker CMs based on their futures contracts at the close of Futures Contract Period transmitted to NCSS for settlement.
4/19/2017

36. Types of Trades/Transactions on NCSS
Non-Exchange Transactions
Broker to Broker (BTB) Delivery Module provides the facility of recording non-Exchange transaction between broker CMs of different exchanges based on underlying exchange trades.
Institutional Delivery System (IDS) provides the facility of recording non-Exchange transactions between broker CMs and non-broker CMs based on underlying Continues Funding System (CFS) .
Margin Financing (MF) module facilitates Broker CMs to arrange funds from other Broker / Non-broker CMs based on their purchases.
4/19/2017

37. Types of Trades/Transactions on NCSS
Broker to Broker (BTB)
BTB module facilitates Broker CMs in settling their inter-exchange transactions. Whereby a Broker CM, based on his underlying exchange trade, initiates BTB transactions while the other Broker CM affirms it. Once a transaction is affirmed, the settlement obligation of the initiating Broker CM is passed onto the affirming Broker CM.
1.1 Initiation Process
Under this module
A BTB transactions can only be initiated by Broker CM of one Exchange to the Broker CM of another Exchange for affirmation;
1.2 Affirmation Process
A counter Broker CM can affirm the initiated transactions. However, the affirming Broker CM cannot edit the details of transactions posted by the initiating CM. Upon affirmation the settlement obligation of the initiating
Broker CM is passed onto the affirming Broker CM.
4/19/2017

38. RECORDING OF BTB TRANSACTIONS ON NCSS
BTB Module on NCSS
Trades executed by the Broker Clearing Members of Stock Exchanges
Initiation of BTB transaction on the Basis of Exchange Trade in Regular Market
Affirmation of BTB transactions by Broker CM of Other Exchanges
Settlement in NCSS by the affirming Broker Clearing Members (CM)
Received/Delivered Securities through NCSS
Payment/Receipt in NCSS
4/19/2017

39. Types of Trades/Transactions on NCSS
Institutional Delivery System (IDS)
IDS module facilitates a Broker CM and a Non-broker CM to record their CFS transactions in settling their exchange transactions directly through the NCSS. Once a transaction is affirmed, the settlement obligation of the initiating Broker CM is passed onto the affirming Non-broker CM. IDS transaction is based on locked-in Continuous Funding System (CFS & CFSR) transactions traded by a broker CM at an Exchange.
1.2 Initiation Process
Under this Module
An IDS transactions can only be initiated by Broker CM to a Non-Broker CM for affirmation;
2.2 Affirmation Process
A counter Non-broker CM can affirm the initiated transactions. Upon affirmation the settlement obligation of the initiating Broker CM is passed onto the affirming Non-broker CM.
4/19/2017

40. Types of Trades/Transactions on NCSS
RECORDING OF IDS TRANSACTIONS ON NCSS
IDS Module on NCSS
Transactions executed by the Broker Clearing Members of Stock Exchanges
Initiation of IDS transaction on the Basis of CFS/CFSR Transactions
Affirmation of IDS transactions by Non-Broker Clearing Member
Settlement in NCSS by the affirming Non-Broker Clearing Members
Received/Delivered Securities through NCSS
Payment/Receipt in NCSS
4/19/2017

41. Types of Trades/Transactions on NCSS
RECORDING OF MF TRANSACTIONS ON NCSS
Margin Financing (MF) Module on National Clearing & Settlement System (NCSS)
Buy Trade / Transactions executed by the Broker Clearing Members in Stock Exchanges
Initiation of MF transaction on the Basis of Aggregate Buy by Financee
Affirmation of MF transactions by the Financier
Settlement in NCSS by the affirming Clearing Members (CM)
Received Securities through NCSS
Payment to NCSS
4/19/2017

42. Types of Trades/Transactions on NCSS
RECORDING OF MFR TRANSACTIONS ON NCSS
Margin Financing Reversal (MFR) transactions on NCSS
Sale Trade / Transactions executed by the Broker Clearing Members in Stock Exchanges
Initiation of MFR transaction on the Basis of sale position at Stock Exchanges & Upto his MF open Position
Affirmation of MFR transactions by the Financier
Settlement in NCSS by the affirming (CM)
Received Securities through NCSS
Payment From NCSS
4/19/2017

43. Balance Order Multilateral Netting
Settlement Options
T+3 Settlement Cycle
T+1 Settlement Cycle
Balance Order Multilateral Netting
4/19/2017

44. Prerequisite for Broker CMs on NCSS Single Trader ID
CM’s Accounts
CDS Account with CDC
Settling Account with SB
SE Trader Id
(Membership Id)
4/19/2017

45. Settling Account with SB
Prerequisite for Broker CMs on NCSS Multiple Trader IDs
CM’s Accounts
CDS Account with CDC
Settling Account with SB
KSE Trader Id
LSE Trader Id
ISE Trader Id
(Membership Ids)
4/19/2017

46. Securities Face Value Market Value Marketable Lot
Eligibility:
CDS live Securities listed at any Stock Exchange
Trading Symbol:
Trading symbols are allocated by NCCPL to NCSS live securities.
Marketable lot:
Marketable lots are determined by NCCPL as per following criteria.
Face Value Market Value Marketable Lot
Upto Rs. 10 Upto Rs shares
Upto Rs. 10 Greater than Rs shares
Greater than Rs. 10 Any market value 20 shares
4/19/2017

47. Settlement Flow in NCSS
Execution of Trades at the
Stock Exchange
Selling Broker
Buying Broker
Online trade feed to NCSS
Netting of trades
Payment to NCSS
Release Payment
Collect Payment
Payment orders and Delivery Receive order
Money Receive orders and Delivery order
Delivery of NCSS eligible securities (with blocked status)
Unblocking of securities on Payment Confirmation
Generation of NE Transactions
T+2
SD-1
T+3 SD
4/19/2017

48. Delivery Schedule
CMs to deliver securities to buying CMs by 12:00 noon for getting credit within Banks’ Cash Counter Timings.
CMs to deliver securities to buying CMs by 3:30 PM for getting credits by 4:30 PM.
Remaining CMs to deliver securities to buying CMs by 4:15 PM for getting credits with next Settlement Date Pay & Collect.
4/19/2017

49. Balance Order Exchange Trades/Transactions Non-Exchange Transactions
Balance Orders in NCSS are computed on net basis for the following transactions of a CM:
Exchange Trades/Transactions
Regular Market Trades
Future Market Trades
CFS Market Transactions
Non-Exchange Transactions
Broker To Broker (BTB)
Institutional Delivery System (IDS)
Margin Financing (MF)
4/19/2017

50. Balance Order Netting Mechanism
Balance Order (BO) is based on Multilateral Netting Mechanism prioritized as under:
Netting of sell and/or buy positions of CM having multiple Exchange memberships.
Sell and buy positions matched among CMs of same Exchange.
Remaining sell buy positions are matched among CMs of different Exchanges.
4/19/2017

51. Delivery Default Management
CM’s who fail to deliver securities till 4:15 PM to be considered delivery defaulting CM’s.
Failed deliveries are reported to respective Exchange for squaring-up.
Respective Exchange to square-up failed deliveries by 11:30 AM next Trading Day.
Buying CMs who have already made the payments to get failed deliveries by 2:00 PM, if squared-up on next Trade Day.
Failed delivery is tried to be squared-up till Settlement Date +1, otherwise, its best market value is returned to buying CMs.
4/19/2017

52. NCSS Pay & Collect
CMs having payable, to pay by 12:00 noon on Settlement Date.
CMs having receivable, to receive by 1:30 PM, provided they discharged all their delivery obligations.
CMs becoming liable due to short delivery reverses to pay by 4:10 PM.
In case of money default, NCCPL shall apply money default procedures.
Remaining CMs having receivable after short-delivery reverse, if any, to receive by 4:30 PM.
Settling Banks to online confirm payments & collections through NCSS by the Designated Time.
4/19/2017

53. NCSS Pay & Collect Advantages of NCSS Pay & Collect:
Automated money settlements;
Same day credits to CMs;
Settlement of amount net of clearing obligations, squaring-up obligations and Tariff etc; and
Single net settlement for CMs who are members of more than one Stock Exchange.
4/19/2017

54. Money Default Management
Non-Payment by a Clearing Member (CM):
Payment should be made by CM on the settlement day till the specific time.
Payment Notice of 30 minutes shall be delivered in case of non-payment.
Suspension or restriction in case of failure to comply with said notice
4/19/2017

55. Money Default Management Actions taken by a Company in case of Suspension or Restriction
Exchange-wise Money Obligation:
Segregation of Stock Exchange-wise net money obligation of a defaulter CM.
Allowing proportionate netting of receivables with payables at different Stock Exchanges.
For this purpose, Non-Exchange transactions shall be segregated to the Stock Exchanges where originally initiated.
4/19/2017

56. Money Default Management Actions taken by a Company in case of Suspension or Restriction
Sources to recover the shortfall:
Utilize 50% amount of Security Deposits of that Exchange of which defaulter is a member.
Above Security Deposit can only be utilized against 85% of the value of securities retrieved or received by the Company of a defaulter CM.
Funds obtain from Stock Exchanges to cover the short fall.
For Non-Exchange transactions, Stock Exchange of initiating Broker CM shall arrange such fund.
Hold back the proportionate amount of credits of CM’s who are member of respective Exchange and to those CM’s who were involved in the Non-Exchange transactions with the defaulting CM.
4/19/2017

57. Money Default Management Actions taken by a Company in case of Suspension or Restriction
Determination of Final Loss:
Square-up/close out the unsettled positions and determine the final loss.
Serve final loss notice to defaulter CM to pay such amount by the next business day.
Declaration of CM a Defaulter by a Stock Exchange or by the Company.
4/19/2017

58. Risk Management
Exposure Monitoring and Management by the Respective Exchange:
Presently, Stock Exchanges monitor and collect margins on CMs’ exposure and mark to market requirements for all NCSS eligible securities.
cont….d
4/19/2017

59. Risk Management cont...
NCSS Controls and Checks
Movement of Securities:
Bought securities are delivered to buying CMs’ CDS main accounts in blocked status.
Blocked securities are available to buying CMs’ CDS main accounts after discharging their obligations.
Short Deliveries Debits:
In case of short deliveries by 3:30 PM, system additionally debits CMs’ accounts with the previous day Closing Prices (i.e., System Prices) with 15% margin of late/fail deliveries.
Retrieval Securities:
In case of money default by CM, blocked securities in his CDS main account are retrieved by NCCPL for selling-out.
4/19/2017

60. Risk Sharing mechanism in case of default
Exchange trades and transactions
Net Security-wise losses of defaulter CM are recovered from other CMs involved in the respective Securities in proportion of their volumes.
Claims against allocated losses to be settled by the respective Exchange out of the assets of the CM in its custody.
Non-Exchange transactions through BTB, IDS & MF
Net losses of Defaulter CM against his counter CMs are recovered from such counter CMs.
Counter CMs’ claims against recovery are proportionately entertained from Security Deposit with NCCPL.
4/19/2017

61. UIN Functionality on NCSS
Background
The revised functionality of Unique Identification Number (UIN) was discussed in the various discussions & meetings among the representatives of Securities & Exchange Commission of Pakistan (SECP) and National Clearing Company of Pakistan Limited (NCCPL)
The purpose was to maintain the integrity of the UIN Database to eliminate the changes of any erroneous entries in future and clean the existing UIN Database
The UIN system is based on UIN Procedures dated April, 03, 2006 and subsequent amendments herein approved by the SECP from time to time
4/19/2017

62. Client Types in NCSS Individual Pakistani Citizen
Individual Foreigner/overseas Pakistani citizens/Non-Pakistani residing in Pakistan
Non-individuals
Corporate/individual - Broker
Corporate – Company
Corporate – fund/other organization
4/19/2017

63. UIN Registration Details
Client Name
Appropriate UIN
Client Code/Client ID issued by the Broker
Client Type
4/19/2017

64. How UIN Functionality will Work?
All members of the exchanges will enter the registration details along with their client codes through the mapping table on National Clearing & Settlement System (NCSS).
All the registration details will be provided to the Stock Exchanges at end of day.
Stock Exchanges will link up the registration details with the trading systems at their end and it will be mandatory for the members to enter client code / ID while placing any order in the trading system.
The trading systems of the stock exchanges will verify the client code / ID with the UIN registration details on Pre-trade basis and will reject any order failing this validation.
4/19/2017

65. UIN Registration for Individuals
Client Type- Individual Pakistani Citizen
The Broker Clearing Member (BCM) will first select Client Type “Individual Pakistani Citizen”
The BCM then enter the CNIC of a client along with the relevant details (other than name)
If the CNIC exists in the UIN Database, the name of such client will appear automatically and the BCM can Save/Past such record
If the CNIC does not exists in the UIN Database, then the BCM will also enter the name of such client. Upon saving, such record(s) will be marked with status “PENDING”
The records with status “PENDING” will be displayed in the Admin List Screen for approval or rejection by the Company
4/19/2017

66. UIN Registration for Individuals
Client Type- Individual Pakistani Citizen
The Company will verify the CNIC from a system, provided by NADRA and mark the status “APPROVED” for valid CNIC. In case, where CNIC does not verify from the NADRA , this will be marked with status “REJECTED”
The BCM can see the reasons for each rejected record in the UIN Setup Screen and can change the UIN and Name of such unverified record and resubmit to the Company for verification
The Company will follow the same process of verification as mentioned above
The “APPROVED” records will become part of UIN Database
The same scheme will be applicable where the joint holder accounts are created
4/19/2017

67. UIN Registration for Individual Foreigner
Client Type -Individual Foreigner/overseas Pakistani citizens/Non-Pakistani residing in Pakistan
The Broker Clearing Member (BCM) will first select Client Type “Individual Foreigner/overseas Pakistani citizens/Non-Pakistani residing in Pakistan”
The BCM then enter the UIN of a client along with the relevant details (other than name)
If the UIN exists in the UIN Database, the name of such client will appear automatically and the BCM can Save/Past such record
If the UIN does not exists in the UIN Database, then the BCM will also enter the name of such client.
The BCM shall also submit the attested copies of UIN documentary evidence to the Company
4/19/2017

68. UIN Registration for Individual Foreigner
Individual Foreigner/overseas Pakistani citizens/Non-Pakistani residing in Pakistan
The Company will verify the UIN from the documentary evidence and mark the status “APPROVED” for valid record. In case, where UIN does not verify from the document, this will be marked with status “REJECTED”
The “APPROVED” records will become part of UIN Database
The same scheme will be applicable where the joint holder accounts are created
4/19/2017

69. UIN Registration for Non-Individuals
Client Type- Non-individuals
The Broker Clearing Member (BCM) will first select the category from Client Type “Non-individuals”
The BCM then search the Name of a client from UIN Database
If the Name exists in the UIN Database, the UIN and Name of such client will appear automatically and the BCM can Save/Past such record
If the Name does not exists in the UIN Database, then the BCM shall submit its request to the Company on prescribed format along with the UIN documentary evidence duly attested by the BCM
4/19/2017

70. UIN Registration for Non-Individuals
Client Type- Non-individuals
The Company shall verify the UIN and Name from the documentary evidence provided by the BCM. Upon verification, the Company shall incorporate such information in the UIN Database and the BCM can register such client through a process mentioned above
The Company may, however, reject any such record(s), and such information shall not be included in the UIN Database.
The same scheme will be applicable where the joint holder accounts are created
4/19/2017

71. FI Margining by NCCPL Background
By the implementation of Client Level Netting (CLN) the Broker Clearing Member (BCM) are under burden of excessive margin payable to the Exchange for their Institution Clients.
It was decided to collect margin directly from Financial Institution (FI) on their affirmed IDS transaction based on Regular and CFS market trade/transactions.
FIs are presently beyond the scope of ambient of the Exchange to impose out obligation on them.
As most of the FIs are familiar with NCSS and have direct relationship with NCCPL as a Non-Broker Clearing Member (NBCM) it was proposed that it is appropriate that NCCPL would collect margin from FIs
4/19/2017

72. FIs Margining Process
All FIs are required to obtain a status of Non-Broker Clearing Member (NBCM) from NCCPL.
After their admission as NBCM, they become eligible to affirm Institutional Delivery System IDS transactions based on Ready and CFS market trade/transactions.
Upon affirmation of IDS transactions, NCCPL shall collect Value at Risk (VaR) based margins against exposure & Mark-to-Market (MTM) losses from NBCMs.
All NBCMs are required to pay collateral against exposure margin & MTM losses to NCCPL with in stipulate time .
4/19/2017

73. FIs Margining Process Contd..
Collateral shall be in the form of cash, Approved Securities, Bank Guarantee or Irrevocable Undertaking.
All BCMs would pay collateral to the Exchanges on trade/transactions executed on behalf of FIs client in Ready and CFS market.
Once the FIs deposited collateral against affirmed IDS transactions, NCCPL will provide the Broker side information of such underlying trade/transaction to the relevant Exchange(s).
The Exchange(s) will adjust the exposure of their Brokers based on the information, provided by NCCPL
4/19/2017

74. 4/19/2017

75. CFS Vs CFS Mk II CFS CFS Mk II
Cash and securities are the only forms of acceptable collaterals
Collaterals also include Undertaking (by FIs rated AA or better), T-bills, PIBs and Bank Guarantees.
Risk management at KSE.
Risk management at NCCPL.
Individual financiers making funds available at their discretion.
Institutional bulk pool of funds available for at least 90 days.
Orders placed through brokers.
Direct financing facility available to AFs
4/19/2017

76. CFS Vs CFS Mk II CFS CFS Mk II
No provision for continuous transactional and system audit.
Continuous transactional and systems audit and findings made public.
Premium rate capped at 30-days KIBOR + 10%
No cap on premium rate
Financiers can hold back lending capacity.
Mandatory on Financier to lend committed amount.
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77. CONTINUOUS FUNDING SYSTEM - CFS Mk II
Benefits of CFS Mk II
Transparent and efficient financing for the market.
Level playing field for investors and brokers
Risk management concentrated in NCCPL.
Institutional bulk pool of funds available for at least 90 days.
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78. Eligible Participants – Financier
Categories of AFs:
Non Broker AFs (NBAF)
Broker AFs (BAF)
All eligible financiers to acquire AF status from NCCPL.
AF premises fitted with NCCPL’s automated terminal, enabling real time financing.
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79. Eligible Financiers to CFS Market
All Scheduled Banks
Mutual Funds
Special purpose CFS financing Mutual Funds;
NBFCs
Insurance companies
DFIs
Brokers, both corporate and individual
Any other Corporate Entity as may be approved by the NCCPL Board of Directors.
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80. Eligible Participants – Finance
Brokers are the only takers of finance from CFS market on behalf of their clients and for their own account.
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81. Modus Operandi for CFS- MK II
Specified shares plus desired rate of return required by Financier input into system.
All offers and bids transparently displayed on system.
Finance able to place own bid for acquiring financing.
Trading done on undisclosed basis.
CFS contract will be for 22 working days.
On expiry of 22 working days, CFS contract automatically be liquidated and finance forced released.
No IDS facility shall be allowed to FIs in the stock market where they fund the CFS market through brokers.
NCCPL to conduct pre-CFS trade verification.
All acceptances of finance by inserting unique client codes registered on UIN system.
Continuous transactional and systems audit and findings made public.
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82. Certainty of Funding Mandatory on Financier to lend committed amount
Financier locked in on each contract for 22 working days.
AF may provide additional funds over and above committed amount. Advance notice of 22 working days for withdrawal of additional funds.
Amounts invested in any eligible share at the financiers’ discretion.
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83. Important Statistics to be made available to the general public on periodic basis, such as:
Utilized committed lines
Total funds due to be released in next 3 days on maturity of CFS contracts
Number of financiers and finances in the market
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84. Cost of Finance
Market forces of demand and supply to determine cost of finance.
AFs can lend below the commitment rate.
Commitment Rate is 30-days KIBOR plus 4%
Offered interest rate determined by each individual Financier based on his own risk assessment of each scrip
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85. Risk Management and Capital Adequacy Regime
Current Risk Management and Capital Adequacy Regime applicable to CFS Mk II.
Mark-to-market losses to be collected in the form of cash.
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86. Acceptable collateral
Shares of listed companies
Undertaking by FIs rated AA and better
Treasury Bills and PIBs (at later stage)
Bank Guarantee
Cash
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87. Eligibility Criteria for scripts in CFS Mk II
Eligibility Criteria to be developed by NCCPL based on parameters such as:
Average daily impact cost;
No. of days traded in last 3 months;
Free float etc.
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88. Position Limits Scrip-wise position limit imposed is as follows:
Market wide position limit: 40% of free-float for each scrip.
Member wide position limit: 10% of free-float of the scrip.
Client wide position limit: 5% of free-float of the scrip. (Client position will be universal and determined on UIN basis)
Member Capital Adequacy: 15 times the NCB of member
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89. Default Management in CFS MK-II
Where Authorized Financier (AF) or Financee fails to settle its money obligation on a settlement day by 12 noon, the NCCPL shall issue a 30-minutes notice to such AF or Financee as the case may be.
Where such AF or Financee fails to settle its money obligation within 30-minutes, the NCCPL shall suspend them and this information shall be disseminated to all the Stock Exchanges.
The respective Stock Exchange(s) shall also suspend such AF (in case of BAF) or Financee in all markets namely Ready and Futures markets.
The NCCPL shall take following steps to complete the settlement:
The securities held in the CDC Blocked Account of suspended AF shall with immediate effect stand transferred in the name of NCCPL;
cont….
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90. Default Management in CFS MK-II
Collateral held against exposure margins and MTM losses of such suspended AF or Financee will be utilized;
The NCCPL shall arrange financing against the retrieved securities and securities deposited as collateral;
Utilization of CFS Protection Fund.
The NCCPL shall ask the relevant Stock Exchange (s) to provide the shortfall amount as per their regulations; and
If the cumulative amount mentioned above is not sufficient, the NCCPL shall hold the proportionate amounts according to the receivables due to all Clearing Members on that settlement day; and
cont….
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91. Default Management in CFS MK-II
In order to proceed further the NCCPL shall refer the case to the Default Management Committee which comprises of the MD and Chairman of the relevant Exchange and NCCPL and nominee from Banking Association and MUFAP
In consultation with the aforementioned Committee, the NCCPL shall net-off all unsettled positions of all the market in each security and determine the security-wise net positions for squaring-up/closed-out. However, in case of default by AF, all his first ticket purchase contracts will be funded by NCCPL and would be closed out when released by the Financee(s)
The NCCPL shall square-up the securities in the ready market of the relevant exchange.
cont….
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92. Default Management in CFS MK-II
Where, the NCCPL is unable to square-up such securities in the regular market of the relevant exchange, the NCCPL shall square-up such securities through a system whereby all Clearing Members (including Non-Brokers) can make a bid for such securities directly.
Where the shortfall still remains after the completion of squaring-up procedure the NCCPL shall after determining the final loss serve a Final Loss Notice to such suspended AF or Financee.
Where the suspended AF or Financee fails to comply with the said notice, the NCCPL shall declare it to be a Defaulting AF or Financee.
Consequently, the relevant exchange(s), shall also declare such AF (in case of a BAF) or Financee to be a defaulter in all markets namely Ready and Futures markets
cont….
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93. Default Management in CFS MK-II
After the declaration of default, the assets of such defaulting AF (in case of a BAF) or Financee under the control of relevant stock exchange such as Membership Card and Room etc shall be liquidated and the proceeds shall be proportionately allocated to all the markets.
In the event there are still unmet losses, the NCCPL shall determine the balance amount exchange-wise, market-wise and security-wise.
After determination of the final loss it will be allocated on a pro rata basis to all AFs who hold open positions in that particular security of CFS Mark II.
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94. Roadmap for CFS Mk II Implementation
Legal And Regulatory Framework
Milestone
Target / Completion date
Finalizing of the Concept Paper of CFS MK-II
June 04, 2007
Circulation of the final Concept Paper of the Market elements
Done
Finalization of CFS MK-II Regulations, Master Agreement with AFs, Bank Guarantee and irrevocable Undertaking
July 20, 2007
Distribution of CFS MK-II Regulations, Master Agreement with AFs, Bank Guarantee and irrevocable Undertaking
July 25, 2007
Finalization of CFS MK-II Regulations by the Committee
July 30, 2007
Alignment of the Stock Exchanges Regulations with NCCPL Regulations
In progress
Obtain NCCPL Board and SECP Approval for NCCPL CFS MK-II Regulations
August 10, 2007
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95. Roadmap for CFS Mk II Implementation Cont….
System Design, Development, Testing & Implementation
Connectivity
Target / Completion date
Infrastructure Development
Done
CFS MK-II System Development
Development and Testing of Trading Infrastructure Application
July 28, 2007
Development of RMS Module and Integration Testing with Trading Infrastructure Application
August 15, 2007
Market Participants Training
Aug 15,2007 To
Aug 24, 2007
Application Live Run
September 1, 2007
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96. NATIONAL CLEARING COMPANY OF PAKISTAN LIMITED
Thank you !
NATIONAL CLEARING COMPANY OF PAKISTAN LIMITED
8th Floor, Karachi Stock Exchange Building, Stock Exchange Road, Karachi – Pakistan
TEL : (92-21) FAX: (92-21)
Website :
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