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A new facility being offered by Central Depository Company

Nov 06 - 12, 2000

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 instrument.

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 operating hours.

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 request.

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.