Risk Management regime for Custodian Clearing Members (“CCMs”)
NCCPL acts as a Central Counterparty between the transacting parties to guarantee the settlement of transactions executed at the Pakistan Stock Exchange Limited ("PSX"). In order to perform this role efficiently, NCCPL also performs the risk management functions for trades and transactions that are executed at PSX.
NCCPL, has proposed and implemented various measures to strengthen the risk management framework with an objective to manage and mitigate the risk prudently without imposing any undue burden on the securities market participants. As part of this continued endeavour, NCCPL has successfully implemented various risk management related provisions for CCMs with effect from September 29, 2021.
These developments in the risk management framework implemented by NCCPL are expected to have significant positive impact not only on the trading capacity of the Securities Brokers ("SBs") executing trades and transactions on behalf of clients of the CCMs but also with respect to mitigation of overall settlement risk managed by NCCPL. Further, it will include CCMs within the risk management framework.
Previously, CCMs were responsible only for settlement of their foreign/local investors trading by using NCCPL's Institutional Delivery System, whereas, for risk management, SBs were responsible for deposit of all margins and Mark to Market losses requirements of NCCPL that are withheld until completion of settlement by CCMs.
With the recently implemented reforms, CCMs shall be responsible to deposit the applicable margins and MtM losses to NCCPL in the form of acceptable Market Collateral.