20000221

KSE to rule on members' default, recovery losses soon

RECORDER REPORT

KARACHI: The Karachi Stock Exchange (KSE) would soon finalise regulations pertaining to members' defaults and recovery of losses suffered in day-to-day transactions to make the trading pattern more transparent.

According to a notice communicated to the members, the KSE has asked all members to send their views on the amendments likely to be made in regulations of members' default and in recovery of losses.

The members' default and recovery of losses regulations of the exchange deals with the cases of member's default case. Under Rule 2(iii) of the said regulations, the losses suffered by a defaulter in particular scrip are born by the members with whom the defaulter had contracted the transactions.

In view of the automation of trades it is not possible for the members to choose contracting member to avoid any transaction with a particular member.

This matter was placed before the Floor Committee of the Exchange in its meetings held on October 6, 1999 and November 3, 1999.

The committee discussed the matter and decided to recommend amendment to Rule 2(iii) of the "Members Default and Recovery of Losses Regulations" as under:

"Upon declaration of defaulter, a statement shall be prepared by the Exchange to ascertain such defaulter's scrip-wise loss with a statement of transactions made with other members in those scrips. The losses arising out of the squaring-up of the transactions by the exchange in a particular clearing shall be debited to the account of all those members involved in the trading of that particular scrip in which the defaulter suffered the losses on pro-rata basis and such members shall have to pay the losses to the clearing house of the exchange."