CDC: MAKING MARKET EFFICIENT AND TRANSPA-
Excerpts from an exclusive interview with Ejaz Ali
Nov 27 - Dec 03, 2000
Obtained Bachelor of Business Administration (M.I.S.)
from the University of Oklahoma, U.S.A. in 1989.
Served as Functional Database Administrator &
Systems Analyst / Programmer Analyst in Cordoba Corporation, Los
Angeles from November 1989 to January 1992. Served Management
Automation Group as Project Manager from January 1992 to February 1994
and in Fidelity Investment Bank Limited as Manager, Money &
Capital Markets, from February 1994 to March 1997.
Currently serving as Head of Marketing &
Customer Support Services in the Central Depository Company of
Pakistan Limited since March 1997.
The affect of CDC on the workings of equities
market is tremendous. In fact, CDC has revolutionized the settlement
procedures of stock exchanges completely. It has not only reduced the
cost of processing transactions for investors as well as CDS elements,
it has also brought extra ordinary efficiency and transparency in
security transactions which was desperately required to restore the
investors (both local and foreign) confidence. This change has brought
our market at par with rest of the world.
In a short span of a little over three years, CDC
has managed to induct about 340 securities into Central Depository
System, which represent approximately 98% of settlement at stock
exchanges, thereby eliminating paper settlement along with the
problems associated with it like fake/stolen/lost share certificates
etc. Since settlement through CDS is electronic, the transfer of
ownership is instantaneous (which previously used to take 45 days) and
it does not attract stamp duty reducing the cost of investors.
Besides settlement services, we also provide:
Delivery versus Payment Facility:
Delivery versus Payment (DvP), a safe and efficient
settlement system, is a bilateral transaction between two Account
Holders/Participants in which funds and securities are transferred
from one account to another electronically. DvP reduces the settlement
risk through simultaneous exchange of securities and funds.
Investor Account Services
Investor Account Services allow investors to
directly open and maintain accounts in Central Depository System for
electronic settlement of securities. Earlier, to settle the securities
through Central Depository System, investors had to open client
accounts (sub accounts) or group accounts with the Participants
(brokers & financial institutions). Now, with Investor Account
Services, investors can also have direct access to CDC. The need for
direct access was greatly felt among investors after the introduction
of CDS. By opening investor accounts with CDC, investors no longer
have to worry about the custody of their securities because investors
now have direct access to their securities, which are maintained by
CDC in accounts operated directly and only on the instructions of
An Account Holder or a Participant, acting either
on his/her own behalf or on behalf of his/her client, can place
securities under pledge. Placing securities under pledge results in
the securities being flagged as no longer available for delivery until
released from pledge. The electronic pledge of shares reduces the
hassles involved in keeping physical custody of shares as well as
reducing the element of risk. In case of a default by client, the
participant can sell out the shares and recover the loan without
delay. Also in case of repayment of loan, the client gets his shares
The idea behind formation of help desk is to
provide instant customer support services regarding the use of Central
Depository System software and workings of Central Depository Company.
It is an interface between CDC & its users and it is also being
used as a tool to educate the users. We have also arranged a Universal
Access Number (111-111-900) for easy accessibility of the Help Desk
staff in Karachi, Lahore and Islamabad.
Certainly. You will appreciate that CDC is not a
profit maximizing organization. Our focus is more on helping our
equities market to become more efficient and transparent then to
generate revenues and our track record is a witness to our claim. We
have reduced our charges significantly since becoming operational we
will continue to do so in future as well. Our aim is to generate
enough revenue to keep running and to keep some for future growth. As
and if we make more, we reduce our charges.
As you are aware that all transactions are logged
electronically in the Central Depository System. Investors can
therefore monitor each and every movement in their account if they so
desire and can take action if their account is being managed in
violation of Central Depositories Act 1997 or Central Depository
Company of Pakistan Limited Regulations. It is to be noted here that
Central Depositories Act 1997 prohibits CDS Participants to move
securities out of client account without proper authorization of
respective account holder.
Future plans of CDC include a Central Clearing
House (National Clearing & Settlement System) serving the Karachi,
Lahore and Islamabad Stock Exchanges. The implementation of this
project is expected to be completed by September 2001. Besides this,
CDC is working towards developing a system for electronic settlement
of Treasury Bills and Federal Investment Bonds. The system shall
increase the efficiency of money market operations as well as reducing
the risk for investors.