KARACHI: National Clearing Company of Pakistan Limited (NCCPL), which provides clearing and settlement services to all three stock exchanges in Pakistan, announced the formal full launch of its latest service for the capital market investors – National Custodial Services (NCS) at a press conference.
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 brokers (Trading Right Entitlement Certificate (“TREC”) Holders) 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 Mr. Nadeem Naqvi, Chairman – NCCPL Board, & Mr. Muhammad Lukman, CEO – NCCPL.
“Such a model offering security and transparency to the investors is the need of the hour,” said Mr. Nadeem Naqvi. “Growing interest of investors in the capital markets, 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 an option like NCS whereby the custody of the securities and cash can be maintained by a separate entity to further strengthen the efficiency and transparency of the capital market operations.” he added.
Speaking at the launch, Mr. Muhammad Lukman stated, “The Capital Markets in Pakistan have great potential to attract investments and provide competitive returns; however, providing an efficient and transparent operating process is essential for the continued development of the capital markets. The NCS is an effort made by NCCPL to add to the effectiveness of the capital market operations. 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. It is 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 will play a vital role in attracting new interest and retaining existing investors of the capital markets.”
Investors can apply to subscribe to NCS by submitting a 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 on-line reports pertaining to NCS and CDS Account Opening Form to open and maintain CDS sub-account with NCCPL (forms are available on the website of NCCPL).
TREC Holder will open a trading account for NCS Client for trading in the stock market. TREC Holder will place orders in the market as per the instruction of NCS Client. Trades which are executed within the limit of securities and cash balances will be settled directly by NCCPL. For e.g. once investor completes all account opening formalities with NCCPL and broker (TREC Holder), they place PKR 100,000 with NCCPL. Investor then asks broker to purchase stock “A” for PKR 50,000 at market price and then instructs NCCPL through UIS Account to display availability of PKR 50,000 to the broker. Broker then checks availability of PKR 50,000 through NCCPL and executes the trade as instructed by the Investor. On settlement Day, NCCPL settles the trade by debiting PKR 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 PKR 50,000 and shares A worth PKR 50,000 both under custody of NCCPL. In case investor wishes to sell these shares A, the reverse cycle will apply.
The NCS offers many benefits to the 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.