Now physical securities can be deposited directly into the Investor Accounts


July 19 - 25, 2004





The Central Depository Company (CDC) has come a long way since commencing operations in 1997 by introducing countless number of services. It has also cut down tariff substantially over the years to deliver the benefits of the electronic system to the investors. Lately, it introduced another service whereby investors will be able to deposit their physical securities in the Central Depository System (CDS) directly through their own investor accounts. This will not only reduce the burden of deposit requests on the participants, but will also offer cost-effective and efficient service to the investors.

In his key note, Dr. Tariq Hassan, Chairman, Securities and Exchange Commission of Pakistan (SECP), praised the role being played by CDC in the development of capital market. He stressed on the importance of measures required for building confidence of small investors in the market and also highlighted that reforms introduced by SECP would go a long way to meet the end. He also emphasized that CDC, financial institution, stock exchanges and brokerage houses have to work hand in hand to attract small savers to the capital market.

He said, "Retail investors have a key role to play in broadening and deepening of the market, broad-basing equity ownership, and re-directing household savings into more productive channels. These small investors may be allowed greater access to the market through the development of remote trading terminals and the development of Internet trading/online trading facilities. All the efforts which stock exchanges, brokerage houses, financial auditors and the listed companies have made and have to continue with, need an infrastructure, that CDC provides."

Though, the brokers fraternity never accepts the fact, Chairman did not hesitate in pinpointing it before the august gathering. He said, "In expanding the investor base of the market, the most crucial prerequisite is building confidence of retail investors in the market. There is generally a feeling of distrust among the retail investors. A lingering perception exists that a few big players run the market and small investors may loose their savings by entering the ring. The challenge for all of us is to change the perception."

Earlier Hanif Jakhura, Chief Executive Officer of CDC said, "The CDC is playing a vital role in increasing the average daily turnover of Karachi Stock Exchange (KSE). Prior to the establishment of CDC, trading volume of over few million shares was a big problem due to settlement problems. As against this when a record turnover of over one billion was achieved recently all the settlements took place without any problem whatsoever."



Outlining the Investor Account Service, Jakhura said that such an account gives individual and corporate clients complete control over their respective securities' portfolio with direct access and transparent handling. The service was initiated in 1999 and has now around 13,500 accounts having three billion shares representing market capitalization of approximately Rs 140 billion.

In his opening remarks Wahab Kodvavi, Chairman of CDC said that the Deposit Functionality would give enormous benefits to the investors as well the participants, offering one-window service to dematerialize and hold securities under their own control. The Investor Account Service is currently available in Karachi, Lahore and Islamabad, but CDC is working to offer it in all the major cities of Pakistan as well as from some Middle Eastern countries through selected banks.

It is necessary to reiterate a point that by this time most of the institutional investors hardly have any stock of physical securities. This service is aimed at catering to the needs of small investors. Some of the investors are of the view that the charges for opening and maintaining investor account are a little high and must be brought down.