KSE, LSE and ISE sign MoU on joint trading in SIFC

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Karachi Stock Exchange (KSE), Lahore Stock Exchange (LSE), and Islamabad Stock Exchange (ISE) on Monday signed a Memorandum of Understanding (MoU) for the joint trading in Stock Index Futures Contract (SIFC). The MoU signing ceremony was held at Auditorium of KSE building, attended by a large number of stock professionals, officials of KSE and business community.

Nadeem Naqvi, Managing Director KSE, Aftab Ahmed Chaudhry, Managing Director LSE and Mian Ayyaz Afzal, Managing Director ISE signed the MoU. On the occasion, Sani-e-Mehmood Khan, General Manager Marketing Development and New Production, gave presentation about the SIFC to the participants.

According to him, the SIFC is simply buying or selling a specified number of contracts whose market-to-market difference is settled through National Clearing Company's standard pay- in-collect system on daily basis. Stock Index Futures benefits: Provides Protection from adverse market movements, envisaged to be an important leverage product, based on the free-float of blue-chip stocks and KSE-30 is bound to have minimal impact cost.

Stock Index Futures, a tool for Mutual Funds: Mutual funds based on an index duplicate the holdings of the underlying index. As per SECP circular Mutual Funds are allowed to use Derivatives for hedging since June 28 2011. If the underlying index rises by 5 percent, the SIFC on that Index shall also rise by 5 percent for that Mutual Fund. This has the tremendous advantage of lower costs. Institutional investors can use Stock Index Futures to hedge their positions in the underlying stocks in their portfolio. Contract Duration would be 90 days, contract would be started from first trading day of the next week following the close of the contract and contract end date would be last Friday of respective month.

Volume would be weighted average value of last half hour of trading in the relevant Stock Index Futures Contract for cash settlement, multiplied by the contract multiplier and expressed in Pakistani Rupees. Final settlement price of the Stock/Sector Index Futures Contract shall be the price calculated based on a set of 121 reading of 15 second intervals (price points) of the underlying index levels taken between the last half an hour of trading. The highest and lowest 20 price points will be ignored and the closing price computed as an average of the remaining 81 price point will be the Final Settlement Price for the settlement of the contract.

Contract Multiplier: Rs 5, minimum fluctuation one index point of underlying index, contract unit would be numerical value of underlined Index (KSE-30, OG or Banking). Exposure Margin & Deposits: 12.50 percent of exposure, 100 percent cash and/or Bank Guarantee and One Index Point would be Minimum Fluctuation (Tick Size). Earlier, Nadeem Naqvi, Managing Director KSE, Aftab Chaudhry, Managing Director LSE and Mian Ayyaz Afzal, Managing Director ISE addressed the event and vowed to continue this kind of joint trading efforts in future as well.

Courtesy: B R

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