The purpose behind establishment of Central Depository
Company of Pakistan Limited (CDC) was to create paperless environment. The aim
was to make transfers instant, ease in settlement and bring transparency in the
whole process. At present over 95 per cent of the daily settlement is through
Central Depository System (CDS). To further facilitate the investors and
participants Investor Account Services were offered. State Bank of Pakistan has
also given consent to automate settlement of government securities starting with
T-Bills. Yet another service being offered by CDC Delivery vs. Payment (DvP), a
bilateral transaction in which cash and securities are transferred
simultaneously from one account to another in the CDS. In other words,
securities move from the selling DvP Account Holder's account to the buying DvP
Account Holder's account and cash moves from the buying DvP Account Holder's
account to the selling DvP Account Holder's account simultaneously.
Execution of a Delivery versus Payment transaction is
possible only when sufficient securities and cash balances exist in the accounts
of the selling and buying DvP Account Holders respectively. As the transfer of
cash and securities is simultaneous, the settlement risk is eliminated
altogether making DvP a secure transaction.
All CDS Account Holders/Participants can become DvP Account
Holders. However, this service is being offered to Karachi based Account
Holders/Participants initially. This service will be offered to Lahore and
Islamabad based Account Holders / Participants in near future.
To open a DvP account, one needs to complete the necessary
formalities. The relevant documents in this regard can be obtained from
Marketing & Customer Support Services Department of CDC. A DvP account is
opened within 48 hours of submission of duly completed documents.
In order to facilitate DvP transactions, DvP Account Holders
are required to deposit funds in their respective accounts through CDC. Funds
can he deposited in CDC through following instruments payable to Central
Depository Company of Pakistan Limited:
• State Bank Cheque
• Account Payee Cheque
• Demand Draft
• Pay Order
Upon deposit of a State Bank cheque or an account payee
cheque of CDC designated bank branch (initially Muslim Commercial Bank, Karachi
Stock Exchange Branch is the designated bank and branch), the deposited amount
becomes available for transactions on the very next business day. In case of
demand draft, pay order or account payee cheque of any bank other than CDC
designated bank branch, credit becomes available upon clearance of the
DvP Account Holders are required to deposit the above
mentioned instruments at the DvP counter of the Finance Department. A
computer-generated receipt is provided to the DvP Account Holder upon deposit of
above mentioned instruments.
For withdrawal, DvP Account Holders are required to submit a
Cash Withdrawal Form (CWF) in duplicate (duly signed by the authorized signatory
(ies) at the DvP counter of Finance Department. A stamped copy of the CWF is
returned to the client as receipt. Cheques can be collected on the next business
day, anytime during operating hours.
DvP Account Holders can also give standing instructions to
withdraw the balance amount in their account at day end. The bank account of
such account holders will be automatically credited by the unutilized amount on
the next working day if their account is with CDC designated Bank Branch.
Otherwise, they can get their unutilized funds through account payee cheque on
the next business day from the DvP counter of Finance Department any time during
DvP transactions are initiated by the selling DvP Account
Holders through DvP request option available in the CDS. A DvP request contains
all the necessary details of the transaction like the security to be delivered,
volume, counter party or the buying DvP Account Holder, the amount to be
received from the counter party, etc. The transaction is executed only upon
acceptance of the buying DvP Account Holder through DvP approval option
available in Direct Transactions Menu of CDS. Cash and securities are
transferred simultaneously once the buying DvP Account Holder approves the DvP
All unapproved transactions are automatically deleted after
the counter hours. The securities in unapproved transactions will be available
for free delivery once the end of day (EoD) is completed for DvP.
DvP Account Holders are not required to pay any additional
charges. Only security movements are charged just as in Free Delivery. In other
words, cash movement is completely free of charge. Cash can be moved on CDS from
one DvP Account Holder to another DvP Account Holder without securities. The
transfer of cash is free from any charge.
It is expected that the introduction of this new facility
will improve the market efficiency, transparency and boost the confidence of
investors in capital markets.