The Presidents/Chief Executives
All banks/DFIs

Dear Sirs/Madam,

 

REPLACEMENT OF COT WITH MARGIN FINANCING

You may recall that Securities and Exchange Commission of Pakistan has announced a time based action plan for phasing out of Carry Over Transaction (COT), generally known as Badla, by the week ending June 3, 2005. In order to safeguard the interest of all stakeholders and to ensure smooth transition from COT to Margin Financing, it has been decided that banks/DFIs shall cap their COT exposure, in each share, at the existing level as on February 25, 2005. This means that the banks/DFIs will ensure that from now onwards, their COT exposure, in any share, does not exceed the COT exposure, in that share, as of February 25, 2005.

2. Banks/DFIs, having substantial exposures in COT financing, are encouraged to extend margin financing facilities to their clients. This will help them in remunerative deployment of their funds released gradually from COT financing because of gradual withdrawal of shares in line with the action plan announced by SECP and will also facilitate the smooth transition from COT to margin financing.

3. Please acknowledge receipt.