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Bonds Automated Trading System to operate from Nov 2

By Tanveer Ahmed

KARACHI: Bonds Automated Trading System (BATS) will be operative from November 02, 2009 at the Karachi Stock Exchange and initially 24 term finance certificates (TFCs) have been short listed for trading.

The KSE announced on Monday that ‘mock trading sessions’ would be running from 1700 to 1800 hours daily starting from October 28 till October 30, 2009. Moreover, members who still have not installed their BATS terminal are advised to get the same as soon as possible.

The initiative will provide transparency and price discovery in the trading of TFCs, which currently is not possible because of buyer-to-buyer change of hands.

The TFCs would provide a broader base to the capital market, enabling investors the choice of going into debt or equity.

It is learnt that in the first phase only institutions would be allowed to enter the arena; individual investors would then follow. Presently, small investors who wish to go into trading in debt instrument can enter through the income funds. With the secondary market alive, trading in TFCs would be transparent in regard to the buyer and seller and price would also be open to public view. KSE members said it was the initiative of the Karachi Stock Exchange in order to bring debt securities on the KSE’s trading platform and create much needed depth in the capital market.

According to a presentation on BATS held at KSE, in the first phase TFCs would be listed and traded at KSE followed by mutual funds’ securities and the debt instruments issued by the State Bank of Pakistan (SBP) in the second stage.

Analysts said that the valuations, volumes and capitalization at the KSE that had eroded by some 50 percent would go up with the launch of this initiative.

This new initiative would provide the issuer with convenient liquidity generation and alternative means of raising debt capital. While the investors would have yield premium opportunity 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 the liabilities. Out of the total 24 TFCs to be traded at BATS 22 are of listed companies while two are of non-listed companies including Pakistan Mobile Communications Limited (2nd issue) and Pak Arab Fertilizers.

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