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KSE to bring unregulated debt securities trading in its net

By Tanveer Ahmed

KARACHI: The Karachi stock Exchange (KSE) will induce capital in the market by bringing the un-regulated trading of debt securities to its network shortly.

Sources told Daily Times on Thursday that the trading platform for the Bonds Automated Trading System (BATS) initially targeting Rs 62 billion TFC market is ready and would be put in place by the end of October.

Market participants said that the plan is aimed at developing a transparent corporate bond market in the country which is inline with international practices. KSE took the initiative to bring debt securities on the exchange platform to further deepen the capital market.

A presentation given at KSE some days back indicated that TFCs would be listed and traded in the fist phase of the exchange whereas in the second stage mutual funds' securities and debt instruments will be issued by State Bank of Pakistan.

According to market participants, the launch of this initiative would help valuations, volumes and capitalization at the KSE which had previously eroded by some 50 percent would then go up.

This new initiative would provide the issuer with convenient liquidity generation and alternative means of raising debt capital. While the investors would yield premium opportunities and investment options in diversified instruments.

The entire trading process would be conducted at the stock exchange under the supervision of KSE, while the National Clearing Company (NCCPL) would look after the 'risk management including generation of payment and delivery order and settlements, and the Central Depository Company CDC), being the custodian of debt securities would perform the transfer function.

On the macro-economic side, this system would improve the country's debt management, as the securities through which the government raises funds locally and internationally, could be traded at the bourse before repayment, which could generate funds supporting writing off liabilities.

Once the system is put in place, it would improve macro-economic indicators, address the financial crunch striking the market and economy alike from time to time and help contain inflation.

Presently, the trading of debt securities and instruments is carried out of the system by both authorized and unregistered market dealers. It is hoped that bringing debt securities trading under the system would bring transparency and improvement in working the exchange and business, according to opine market analysts.

Officials said that this initiative would provide the much needed transparency in the trading of debt securities market and would also be beneficial for the stock market performance.

However, analysts said that initially the volumes of the debt securities would be quite low but as soon as the market develops, the volumes and the capitalisation would improve.

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