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Inclusion of Pakistan in MSCI Emerging Market Index

Press Release - NCCPL

We are enthralled at the successful completion of the process of inclusion of Pakistan in MSCI Emerging Market Index with effect from June 01, 2017.

A long awaited and well deserved transition achieved through the tireless efforts made by the apex regulator Securities and Exchange Commission of Pakistan “SECP” and Pakistan Stock Exchange “PSX” under the leadership of Chairman SECP and the guidance and support extended by honorable Finance Minister.

After the announcement of the effective date of inclusion, keeping in view the problems faced by Qatar at the time of their inclusion in MSCI Emerging Market Index, many doubts and concerns were raised with respect to the capacity and capability of the capital market stakeholders to manage the event in a flawless manner. However, once again proper planning, close coordination among institutions and collective team work has proved that no milestone is impossible to achieve.

The National Clearing Company of Pakistan Limited "NCCPL" was at the center of the activity being the provider of clearing and settlement services and responsible for performing the risk management function. Recognizing the importance of its role, NCCPL closely worked with the capital market stakeholders to extend required facilitation. The NCCPL's management worked together towards the accomplishment of the common goal to ensure seamless provision of services during the relevant period. It was also perceived that the event will trigger significant trading activity from the foreign portfolio investors that are mostly clients of the Custodian Banks (reputable foreign financial institutions operating in Pakistan). These Custodian Banks are Custodian Clearing Members of NCCPL and settle the trades that are executed by the Brokers Clearing Members on behalf of their clients directly with NCCPL.

The task in hand was gigantic and can be measured on the basis of the  trading activity carried out only on May 31, 2017 which was valued at PKR  54 billion (Regular Market), 4 times more than the average trading values in last 6 months. However, NCCPL remained focused on ensuring the seamless settlement of all trades and transactions.

Despite implementation of various measures to facilitate the market participants, the Custodian Clearing Members came across the challenge of managing transactions valuing PKR 97 billion (both sides buy+ Sale) on May 31, 2017, that was 30 times more than the average trading value settled by them since January 2017 on any trade date. The Custodian Clearing Members made sincere efforts to absorb the enormous temporary increase in affirmation process, however, given the quantum of transactions, complexity and layers attached to the affirmation process delays were observed in the affirmation process leading to a situation where the trades executed on behalf of foreign portfolio investors remained un-affirmed by the custodian banks to the tune of PKR 53.9 billion on June 01, 2017 at 10:30 pm at the end of extended working hours leading towards merging of settlement

By the grace of Almighty, the collective decision of merging the settlement proved to be correct, the Custodian Clearing Members kept working till late at night on June 04, 2017 and continued working even till early morning on June 05, 2017. This led to timely settlement of all transactions on June 05, 2017.

We would like to place on records our sincere gratitude for the cooperation and courtesy extended to us by the SECP, State Bank of Pakistan, Central Depository Company, and PSX during the course of this event, We truly appreciate the hard work and long working hours put in by the management of the Custodian Clearing Members for completing the process at their end.  We are hopeful that this re-classification will have significant impact in the growth and prosperity of the Pakistan’s Capital Market and in portraying it as an investment avenue of choice for the foreign investors.

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