KARACHI STOCK EXCHANGE

Margin Financing, Practices, & Conventions

Presented By Karachi Stock Exchange IT Division

Margin Financing

Section 1 GENERAL ......................................................... 1-1

1.1 1.2 1.3 1.4 1.5 Introduction and Objective .................................................................................... 1-1 Upload Dataset Format Specifications.................................................................. 1-2 Weekly Financial Institution Wise Borrowing Information ..................................... 1-2 Client wise weekly Statement of Margin Transactions ......................................... 1-3 Client wise Daily Statement of Margin Transactions ............................................ 1-4

Section 2 FUNCTIONAL MODEL...................................... 2-5

2.1 2.2 2.3 2.4 The User Interface ................................................................................................ 2-6 Scrip Wise Daily Statement of Margin Trading ..................................................... 2-7 Client Wise Weekly Statement of Margin Trading ................................................ 2-8 Weekly Position of borrwongs with Banks/Financial Institutions .......................... 2-9

Margin Financing

ii

Section 1

GENERAL

This Manual documents the operational environment and procedures for the handling of Margin Financing transactions in line with the directives prescribed by the Securities & Exchange Commission of Pakistan (SECP). This document is targeted for technical audience of Brokerage Houses so that the basic assumptions in term of preparing, generating and transmitting of Margin Financing data from Brokerage Houses to the Exchange may take place in an efficient, reliable and smooth manner.

1.1

Introduction and Objective

This document is written with the purpose to provide detailed instructions on how to provide Margin Financing information to the Exchange, which in turn is forwarded to Securities and Exchange Commission of Pakistan. This manual assumes that the reader is conversant with English, understands everyday IT terms such as download, upload, filtering, and text box and has some familiarity with Oracle Database. The envisaged Margin Financing Operations would require certain enhancements in the Brokerage Houses application so as to report/disclose the information relating to Margin Financing transactions as prescribed by the Exchange from time to time. This may require the Application Vendor or the brokerage houses themselves to perform below listed activities:

Modify the back office application. Add certain schemas to their database in order to capture the aforementioned datasets. Write certain procedures or processes to mark and identify the Margin Financing transactions. Make automated procedures so that a single client exposure may not exceed 10% of the total Margin Financing exposure limit. Develop programs to generate the information as prescribed in this document. Train the application operators to upload the information into the KSE corporate database.

Margin Financing

1-1

1.2

Upload Dataset Format Specifications

The Software Developers and Application Vendors are primarily responsible for the development and maintenance of Margin financing application. This portion is indented for designers in order to fulfill the Exchange requirements in terms of compliance with procedures prescribed by the SECP. Stated below are the detailed specifications of information that should be generated by enhanced application software of Brokerage Houses: Weekly Financial Institution Wise Borrowing Information Client wise Weekly Statement of Margin Transactions Scrip Wise Daily Statement of Margin Transactions

1.3

Weekly Financial Institution Wise Borrowing Information

Column Comments This is the Date of last trading Day of the relevant week Specification DD-MON-YYYY

Column Description *Trading Date

*Member Code Bank Code Outstanding Exposure

The KSE assigned 3 character code The KSE assigned 6 character code This presents outstanding amount of utilized Margin Financing as of reporting date.

Varchar2 (3) Varchar2 (6), see annex Number (15)

Credit Limit

Margin Financing Credit Limit provided by the bank to the broker.

Number (15)

Value of collaterals

Value of Collaterals against Margin Financing provided by the bank.

Number (15)

The User program shall produce the underline information in a plain text file format in below mentioned format with no null values: bank_code|outstanding_amt|credit_limit|value_of_collaterals MCB|99999.99|99999.99|999999.99 HBL|99999.99|99999.99|999999.99 MTB|99999.99|99999.99|999999.99 *Columns Marked with * are not made to be the par to of upload file

Margin Financing

1-2

1.4

Client wise weekly Statement of Margin Transactions

Column Comments This is the Date of last trading Day of the relevant week Specification DD-MON-YYYY

Column Description *Trading Date

*Member Code Symbol Code Client Code

The KSE assigned 3 character code The KSE assigned 12 character code for scrip The member assigned 15 character code for each client.

Varchar2 (3) Varchar2 (12) Varchar2 (15)

Number of Shares

This is the number of shares for which a Brokerage House has arranged margin financing in given scrip for a particular client.

Number (15)

Value of Shares

This is the mark to market value of shares for which a brokerage house arranged Margin Financing in given scrip for a client for a particular reporting week.

Number (15)

Outstanding Exposure

This presents the net margin financing obtained to date.

Number (15)

Value of Collaterals

Total Value of Collaterals against Margin Financing deposited with broker by the client.

Number (15)

The User Program shall produce the underline information in a plain text file format in below mentioned format with no null values: Client_code|symbol_code|no_shares|value_shares|oustanding_exposure|value_collaterals CL01|HUBC|99999.99|999999.99|999999.99|999999.99 CL01|HUBC|99999.99|999999.99|999999.99|999999.99 CL01|HUBC|99999.99|999999.99|999999.99|999999.99 *Columns Marked with * are not made to be the par to of upload file

Margin Financing

1-3

1.5

Scrip wise Daily Statement of Margin Transactions

Column Comments This is the Date of trading day The KSE assigned 3 character code The KSE assigned 12 character code for scrip This is the number of shares for which a brokerage house arranged Margin Financing in a given scrip. Specification DD-MON-YYYY Varchar2 (3) Varchar2 (12) Number (15)

Column Description *Trading Date *Member Code Symbol Code Number of Shares

Value of Shares

This is the mark to market value of shares for which a brokerage house arranged Margin Financing in a given scrip.

Number (15)

Financing Provided

Total amount of margin financing provided by the member in a given scrip for the day.

Number (15)

Value of collaterals

Value of Collaterals obtained against Margin Financing from all clients in a given day.

Number (15)

The User program shall produce the underline information in a plain text file format in below mentioned format with no null values: symbol_code|no_of_shares|value_of_shares|outstanding_exposure|value_of_collaterals HUBC|99999.99|999999.99|999999.99|999999.99 HUBC|99999.99|999999.99|999999.99|999999.99 HUBC|99999.99|999999.99|999999.99|999999.99 HUBC|99999.99|999999.99|999999.99|999999.99 HUBC|99999.99|999999.99|999999.99|999999.99 *Columns Marked with * are not made to be the par to of upload file

Margin Financing

1-4

Section 2

FUNCTIONAL MODEL

This section defines the User Interface. The user is required to download the new NCHS interface so as to use the Margin Financing Interface provided in the NCHS menu in between the COT Release and Future Contracts button. This interface is only for the purpose of uploading the Margin Financing information to the exchange so as to meet the underlined regulations. Hence it is necessary to note that this interface may not be confused with the overall functions of Margin Financing and its usage, which is instrumental to the Brokerage Houses themselves.

Margin Financing

2-5

2.1

The User Interface

The Data Upload and Processing option screen appears once the user clicks the Margin Financing button on the NCHS Menu. The User can upload the file into the Margin Financing System by placing the file in a directory, and then by pointing that directory through NCHS given option as shown in the picture. After uploading the data to Margin Financing Interface the user may modify the data through view modify option provided in the Data Upload and Processing option. These options shall be activated in accordance with timelines notified from time to time by the Exchange. Once the time for uploading and processing the data is over or the user has exercised the Submit option provided in the view/modify screen, the user shall not be eligible for uploading and/or modifying the same.

Margin Financing

2-6

2.2

Scrip Wise Daily Statement of Margin Trading

The Scrip wise Daily Statement of Margin Transaction screen shows the relevant uploaded information; the user has all the freedom to modify the contents, inserts new datasets or erases any unwanted records or datasets. The user should review the contents, and an exercise of SUMBIT option shall lock the Margin Financing data of the current screen for that brokerage house.

Margin Financing

2-7

2.3

Client Wise Weekly Statement of Margin Trading

The Client wise Weekly Statement of Margin Transaction screen shows the relevant uploaded information for each and every margin financing eligible scrips. The user has all the freedom to modify the contents, inserts new datasets or erases any unwanted records or datasets. The user should review the contents, and an exercise of SUMBIT option shall lock the Weekly Margin Financing data of the current screen for that brokerage house.

Margin Financing

2-8

2.4

Weekly Position of borrwings with Banks/Financial Institutions

This screen shows the Weekly Position of borrowings facilities extended by Financial Institutions with relevant uploaded information for each bank. The user has all the freedom to modify the contents, inserts new datasets or erases any unwanted records or datasets. The user should review the contents, and an exercise of SUMBIT option shall lock the Weekly Margin Financing data of the current screen for that brokerage house.

Margin Financing

2-9