Beruflich Dokumente
Kultur Dokumente
Prepared By
AHSEN KHURSHID – BEM / 863
December 2008
BIZTEK 1
Central Depository Company Of Pakistan Limited - Overview
CONTENTS
1. INTRODUCTION
2. CAPITAL MARKETS
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Central Depository Company Of Pakistan Limited - Overview
CHAPTER 1:
Introduction:
1.1 – Introduction
1.2 - Purpose of Study
1.3 Research Methodology
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Central Depository Company Of Pakistan Limited - Overview
1.1 - Introduction:
The topic which I have chosen for my project is “Central Depository Company of
Pakistan Limited – An Overview”. Central Depository Company (CDC) is a very
renowned company of Pakistan and front line regulators of Capital market.
The reason for choosing said topic for my project is to bring awareness among the
public regarding the role & functions of Central Depository and educate them regarding
this unique nature of organization. We will discuss in detail the business & technical
areas of CDC in later chapters which will help the readers to understand the purpose of
existence of this Company.
I have used the secondary data for my project based on the company’s internal reports,
procedures, Regulations and interviewed various senior officials for the information. I
have also applied my own experience in the company to further enlighten my project.
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CHAPTER 2:
Capital Markets:
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Forms of investment
Investments can be in various forms, some of these are: real estate, business
enterprises, precious metals and stones, valuable works of art, financial investments
etc. Some forms of investment may have a non-financial reward too, such as aesthetic
or emotional pleasure from works of art, jewellery, house property etc., but in most
cases we strive to at least retain the purchasing power of our savings (i.e. beat inflation)
and preferably come out ahead.
Financial Investments
Capital Market
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This is the market place where financial investments (normally of a long-term nature)
can be acquired or disposed off. The term is used in the plural to signify separate
market segments for various types of financial investments. The stock exchange (also
referred to as the stock market) is where shares and bonds issued by business entities
(companies) are traded. There is sub-category called the Money Market, which is
normally the market for acquiring or disposing off very short-term financial investments
but will include inter-bank placement of very short-term deposits and dealings in
currencies too.
Equity
In the first capacity, we participate in the ownership of the business and have an
equitable right (legally enforceable right) in the business, to the extent of our share in it.
Thus we become “equity” or “share” holder – both terms are synonymous in the
investment parlance. As an equity investor, we are entitled to distribution of profits and
in the event the business is liquidated at some stage, we are entitled to our share of the
net assets left over.
Debt
In this case we have a debt that we have to recover from the business in accordance
with an agreed repayment schedule and we are entitled to compensation for the use of
our money (interest, by whatever name called). The money we invest with government
and banks is also in the category of debt. From the point of view of the borrowing entity,
we are a creditor and we rank senior to equity in the event of liquidation i.e. creditors will
be paid off first and whatever is left over after that will go to the equity holders (owners).
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Section 2(m) of Securities & Exchange Ordinance 1969 defines a Stock Exchange as
under:
“Stock Exchange means any person who maintains or provides a market place or
facilities for bringing together buyers & sellers of securities or for otherwise performing
with respect to securities the functions commonly performed by a stock exchange, as
that term is generally understood, and includes such market place and facilities”
In view of the definition given above, a stock exchange simply means a market place for
the buying and selling of securities (equity / debt) of different companies listed on stock
exchange.
The purpose of a stock market is to facilitate the exchange of securities between buyers
& sellers, thus reducing the risk of investing. A stock market is nothing more than a
super-sophisticated farmers market linking buyers & sellers.
A stock Exchange is responsible for vetting companies before they can be admitted to
have their shares traded on the stock market. It provides a market place for shares to
be bought and sold by bringing companies and investors together in one place through
the intermediation of brokers. It watches over the market constituents to ensure that the
market is working efficiently and fairly thereby acting in a policing role for the market. It
helps corporations and governmental units to raise capital. It provides an opportunity to
people to grow their savings by investing in the securities of different listed companies.
It reveals investors judgment about the potential earning capacity of corporations, thus
giving guidance to corporate managers. It generates employment & income also.
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Karachi Stock Exchange (KSE) is the largest stock exchange in Pakistan. The legal
status of these exchanges is that these are public limited companies, limited by
guarantee. The term guarantee means that members are liable for the liabilities of the
exchange to certain extent in case the exchange is wound up under the provisions of
applicable law. These are non-profit companies as their profit is not divisible among the
members. However, the same profit may be utilized for the betterment of the exchange.
Section 2(1) of the Securities & Exchange Ordinance 1969 defines Security as:
“Security includes
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So in simple words, every legal document that creates a legal right against a company
or a person is a security. It may be a debt or equity security. Each share represents a
small stake in the equity of a company. You can buy large or small lots to match the
amount of money you want to invest. A company’s share price can rise or fall as a result
of its own performance or market conditions.
Once the shares are brought and transferred in your name your name will be entered in
the company’s share register, which will entitle you to receive all the benefits of share
ownership including the rights to receive dividends, to vote at the company’s general
meetings to receive the company’s reports. If you decide to sell your shares you will
need to deliver share certificates to the broker in time for the transaction to be
completed.
Companies issue shares to raise money from investors. This money is used for the
development and growth of businesses of companies. A Company can issue different
types of securities such as ordinary shares, preference shares, shares without voting
rights or any other shares as are permissible under the law. These give shareholders a
stake in the company’s equity as well as a share in its profits, in the form of dividends,
and a voting right at general meetings of shareholders.
With the introduction of the Central Depository System (CDS), an investor can have
shares in paper form or can own shares in an electronic book- entry form at the Central
Depository Company (CDC) which will be discussed in detail in coming chapter.
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CHAPTER 3:
3.1 – Introduction
3.2 - Implementation of Central Depository System (CDS)
3.3 – Features & Benefits of CDS
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CENTRAL DEPOSITORY COMPANY OF PAKISTAN LIMITED - OVERVIEW
Introduction
Central Depository Company of Pakistan Limited (CDC) was incorporated in 1993 and
subsequently became operational in 1997 to manage and operate the Central
Depository System (CDS). CDS is an electronic book entry system to record and
transfer securities. Electronic book entry means that the securities do not physically
change hands and the transfer from one client account to another takes place
electronically. An IBM led consortium along with the management of the company
implemented CDS in Pakistan.
The aim of CDC is to operate as a central securities depository on behalf of the financial
services industry so as to contribute to the country's ability to support an effective
capital market system which will attract institutional and retail level investors from
Pakistan and abroad.
Mission Statement
CDC is committed to provide secured and dependable services to the capital and
financial markets in an efficient and cost-effective manner comparable to best
international practices. The Company’s aim is to be the centre of excellence by
continuously employing the state-of-the-art technology available and best talent in the
country while maintaining good corporate governance in its working. It is committed to
provide its employees an environment of professional and personal growth.
Vision
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With exponential growth in the Pakistani Capital Market during the last decade resulting
in manifold increase in trading volumes, the physical handling of paper certificates not
only became laborious but also time consuming. The manual system was no longer
feasible. It was in this perspective that CDC was incorporated to implement and operate
the CDS.
Experts of the renowned international firm Price Waterhouse conducted a study in 1993
to develop a conceptual framework for the depository. The study was sponsored by the
United States Agency for International Development (USAID) and their report laid the
foundation of depository design.
In November 1994, the Board of CDC awarded a turnkey contract to the IBM
consortium for the implementation of the system in Pakistan. The IBM consortium
proposed a comprehensive Master Implementation Plan (MIP) to the CDC board after a
detailed analysis of the following.
National requirements
Company and Banking laws
Regulations & Procedures
Financial and organizational aspects of the project
Thereafter, user groups performed, training sessions were conducted to introduce the
system to the clients and the necessary infrastructure was developed. The
infrastructural development included testing and development of software, hiring and
training of personnel and establishment of CDC offices. The CDC offices at Lahore and
Islamabad were connected to the head office through VSAT link leading to the
development of a geographically neutral depository.
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Since the last decade, the capital markets of Pakistan have witnessed a substantial
growth leading to a manifold increase in the trading volume. The custody and safe
keeping of physical certificates required maintenance of huge vaults by the individuals
and institutions and the physical settlement of certificates was no longer feasible.
Moreover, the manual system was also plagued by lengthy delays, risks of damage,
forgeries and considerable time and capital investment.
Following is a list of the major problems faced by the Members of the Stock Exchange,
Investors, Issuers of Securities and others:
Signature verification
Checking correct value of transfer stamps
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The answer to all these questions was to set up an electronic book entry system in
Pakistan. This led to the establishment of Central Depository Company of Pakistan
Limited developed to manage and operate the Central Depository System (CDS).
% AGE OF
SR.
INSTITUTION SHARE
#
HOLDING
1.
The Karachi Stock Exchange (Guarantee) Ltd. 39.8%
2.
Lahore Stock Exchange (Guarantee) Ltd. 10.0%
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3.
Citicorp Overseas Investment Corporation 10.0%
4.
MCB Bank Limited 10.0%
5.
Habib Bank Limited 6.35%
6.
National Investment Trust Limited 6.35%
7.
Investment Corporation of Pakistan 5.0%
8.
NIB Bank Limited 5.0%
9.
International Finance Corporation 5.0%
1
0. Islamabad Stock Exchange (Guarantee) Ltd. 2.50%
Total
Security Measures
1) CDS IDs and Passwords: All CDS elements are allocated unique IDs and
Passwords through which to enter the system.
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2) Dial-in IDs and Passwords: This feature is an additional layer of security for
those clients who are connected to us through telephone lines.
Contingency Site
CDC provides the backbone for smooth and efficient settlement operations of the
Pakistani capital market. Almost all of the total settlement of the stock exchanges is
now done through the CDS. By recognizing the computer facility being the core
resource for the operation of CDS, we have critically evaluated potential risks of CDS
becoming unavailable to the users and accordingly developed a contingency site
office in Karachi. The site is installed with redundant hardware; software and
requisite network to provide cost effective connectivity and support to all CDS users.
A reliable data communication link is deployed to connect the remote site with the
primary site and transmit the latest CDS status to the remote site at the shortest
possible intervals. This arrangement is an additional to daily tape back ups made to
keep record of the CDS status and will ensure convenience, safety, reliability and
efficiency.
Insurance Coverage
In order to protect itself from any loss arising due to claim lodged by any CDS
element, the Central Depository Company of Pakistan Limited has obtained
insurance coverage against the following risks:
1. Employees' infidelity
2. Computer Crime
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3. Professional Liability
Insurance coverage has been acquired from a consortium of New Jubilee Insurance
Company Limited, EFU General Insurance Company Limited, Adamjee Insurance
Company Limited and PICIC Insurance Limited for Rs. 1 billion.
Since commencement of business the sum insured was Rs. 50 million, however it
was increased to Rs. 300 million on December 30, 2005. The coverage was
increased again on November 01, 2006 and now stands at Rs. 1 billion.
Services Offered
Since inception, CDC has been providing timely and effective customer support to
CDS elements through dedicated Customer Support Staff regarding the use of CDS
software and the workings of Central Depository Company of Pakistan Limited. The
system works as an interface between CDC and its clients and is also being used as
a tool to educate the clients.
Highly trained professionals with complete and lucid knowledge of the CDS can be
contacted in Karachi, Lahore and Islamabad through toll free 0800-CDCPL (23275)
during operating hours. It is a completely automated system in which queries are
entered in Complaint Management System by our staff and are either satisfied on
receipt or referred to the concerned department electronically for resolution. This
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electronic transfer of queries reduces considerable paper work and processing time.
To ensure early response to every problem, any query pending over its allocated
time is reported to the senior management.
Just like Central Depository System, Customer Support Help Desk is also
geographically neutral. This ensures consistent standard of services throughout the
country.
An Account Holder / Participant can confirm the balance of the accounts maintained
by them from Customer Support Services. In this regard, the Account Holders /
Participants are required to provide a duly signed Account Balance Statement
obtained from their terminal. Upon receipt of the statement, the same is generated
from CDC's terminal and handed over to the requestor after due verification.
Such requests are also entertained for sub account holders. However, they are
required to provide a request letter and present their original NIC to obtain the report.
This measure has increased the confidence level of investors substantially.
All CDS elements are required to access CDS through their authenticated terminals
only. For the benefit of its clients, CDC has provided computer terminals at its
premises to be operated by clients, (all CDS elements) in case of any technical
problem at their end. With this facility, clients can directly log on to their accounts
from CDC premises and complete their transactions.
Clients are required to bring a request letter duly signed by the authorized signatory
(ies) of the account to avail this facility.
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CDC E-mail Facility provides CDC the capability to send encrypted e-mails with
digital signatures to its Elements in Karachi, Lahore and Islamabad. With this facility
in place, CDC can correspond to its clients in an effective and cost efficient manner.
Users can open the received e-mail by clicking 'Outlook Express' option from the
'Programs' sub menu of the MS-Windows 'Start' menu. The same operation can be
executed by clicking MS-Outlook Express icon in the task bar. Once the Outlook
Express main screen appears, user would be able to Receive, Read and Delete e-
mails.
Deployment of this E-mail service reflects CDC's efforts toward its customer centric
focus and providing quality service and satisfaction to its clients.
Training
In order to familiarize our clients with the concept & workings of the Central
Depository System, CDC provides training to its clients on as needed basis. In a full-
day training session, clients are walked through the Central Depository System
enabling them to have a comprehensive understanding of the system. CDC does not
charge clients for training and the clients can request as many session as they
desire.
In addition to the above, various other services like password reset, change in
registration details of Account holders / Participants, change in user option, change
of authorized signatories and installation / reinstallation / additional connection etc.
are provided to the clients.
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CHAPTER 4:
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Issuers/Registrars/Transfer Agents
The companies or issuers of capital whose securities are converted from physical to
electronic book entry securities play a significant role in the Central Depository
System (CDS). To induct a security into CDS a security must first be declared as an
eligible security (by fulfilling the admission criteria set out in CDCPL Regulations) for
the purposes of CDS. Once a security is declared eligible for the purposes of CDS,
the issuer is provided with the necessary software to connect to the CDS for
verification and dematerialization of the said security and then only it can be inducted
into CDS (made live in CDS).
Eligibility Process
Induction of an Eligible security
Eligibility Criteria:-
The issuer has the data processing capacity and operational capability.
The securities are valid, legal and transferable by book entry or otherwise.
The issuer has acquired or has the capability to acquire the capacity to
communicate reliably with CDC in accordance with the procedures.
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The issuer employs or has the capability to employ personnel familiar with the
regulations and procedures to carry out its obligations.
The declaration of the Securities as Eligible Securities would be in the public interest.
Induction Process:-
A) Notice of Eligibility
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The Central Depository Company of Pakistan Limited was formed under Central
Depositories Act 1997 which was passed on June 10, 1997. Subsequently, Central
Depository Company of Pakistan Limited Regulations were developed and approved
by the Securities and Exchange Commission of Pakistan (formally known as
Corporate Law Authority).
Relevant Legislation:
CDS Network
CDC's network spans across multiple cities of Pakistan. The sites are interconnected
through highly reliable WAN links. The reliability of links is backed up with multiple
levels of redundancy. In case of a link failure, the fallback to backup link is completely
unnoticeable. Along with reliability and redundancy, security is one of the most
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important concerns for CDC. Confidentiality, Integrity and Authenticity is ensured for
all transactions that are carried over the network.
Stock users are connected through resilient and dedicated links while clients other
than stock users (external clients) connect to the CDC network through dial-in to our
local point of presence by using Pakistan Telecommunication Corporation’s public
switched telecommunication network. Sufficient numbers of simultaneous dial-in lines
at various sites are maintained to allow first call connection. We also have more
reliable and high bandwidth metro fiber connectivity for the external clients. Currently
this facility is being offered to the Karachi based external clients only.
In line with the International standards, CDC also maintains state of the art Disaster
Recovery (DR) and Business Continuity by maintaining a complete DR site which
enables the company to retain all of its critical services with zero data loss from the
DR site in case of a site level disaster.
CDS Software
The installation and set-up of the proprietary CDS Client at customer site is supported
by the Customer Network Support Services.
The software updates for CDS Client are delivered over the CDC network for efficient
configuration management.
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CDS Hardware
CDS Client is an Intel based PC with a LAN card for the users at local stock exchange
LAN and a standard modem for the remote users.
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• Pledge
• Corporate Action
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IMMOBILISATION
The CDC is an ‘immobilised’ type of depository. Account Holders do not hold
Registered Form Securities certificates as evidence of their ownership of
securities. Registered Form Securities Certificates deposited in CDC are
cancelled by the Issuer/Transfer agent (R/TA).
ACCOUNT STRUCTURE
The Central Depository System maintains the following types of accounts :
• Main Account — Each account holder in the system is allocated a
main account by virtue of being an account holder in the CDS. This
account is mainly used as a transit account for deliveries received/sent
by the account holder. The account holders are required to transfer
security balances from Main account to respective account as soon as
possible.
• House Account — used for keeping securities beneficially owned by
the account holder concerned.
• Sub-accounts (Client Accounts) — used for keeping securities
belonging individually to each of those clients of a Participant who
require their securities to be kept in a Sub Account.
• Investor Accounts — Investor accounts are accounts which can be
opened and maintained by CDC Investor Account Services.
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transactions shown in the table are given in the manual in the chapter dealing
with Direct Transactions.
Free
Pledge
Deposits Withdrawals transfer Pledge
release/ call
s
Account Holder/Participant
Stock Brokers X X X X
Bank/Financial
X X X X
Institutions
Institutional Investors X X X X
Others
Eligible Pledgee X
Registrar/Transfer
X X
Agent
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Detailed Procedures
The detailed procedures for the deposit of security certificates into the
Central Depository System are as follows:
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Note: During the Book Closure period for a Security, the System
will not allow Account Holders/Participants to process and post
Deposit Request transactions for that particular Security.
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Detailed Procedures
FREE DELIVERIES
The term ‘free deliveries’ applies to all book-entry deliveries of
securities, which take place without any corresponding movement of
cash on the system.
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Free deliveries are executed in the CDS by means of the four following
options:
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The Bulk Intra Account Movement transaction has been provided in the
CDS to cater for the need for posting or deleting a large number of
previously entered but un-posted Intra Account Movement transactions,
instead of having to post each transaction individually. It is purely a
device for saving time and effort.
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The bulk inter Participant Free Delivery transaction has been provided
in the CDS to cater for the need for posting or deleting a large number
of previously entered but un-posted Inter Participant Free Delivery
transactions, instead of having to post each transaction individually. It
is purely a device for saving time and effort.
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Detailed Procedures
2. The Eligible Pledgee creates a new group for the pledge using the
Open Group transaction
5. The Eligible Pledgee retains the signed form mentioned above for its
own record.
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PLEDGE CALL
Securities, which have been pledged can be transferred to any other
account at any time by the Eligible Pledgee or transferred to any other
account in CDC at any time by the Eligible Pledgee for handling under
his instruction. The CDC does not require the Eligible Pledgee to
establish that the Pledgee has defaulted or otherwise created a
condition whereby a pledged call may be made.
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CORPORATE ACTIONS
For all purposes and in particular for the purpose of Corporate Actions,
the records of the Depository will, in fact be considered an extension of
the Members’/Securities Holders’ Register maintained by the
Issuer/Transfer agent (R/TA). In other words the details of the beneficial
owners of the CDC’s nominee holding will be obtained from the records
of the Depository and shareholder entitlements will be determined, as
far as the securities held in the Depository are concerned, on the basis
of the Beneficial Owners Report provided by the CDC.
BOOK CLOSURE
A book closure period is a period during which the Issuer/Transfer
agent (R/TA) does not accept for processing any certificates for the
purpose of recording their transfer of ownership. Traditionally, the book
closure period is a device whereby, in the absence of depository
systems, the Issuer/Transfer agent (R/TA) were given adequate time to
process the large numbers of security transfers which were invariably
submitted before the cut-off date for carrying out corporate actions.
In this regard, issuer shall notify to the CDC as per standard format of
any Book Closure period fixed by them, specifying in the notice the
Book Closure start date and the Book Closure end date.
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On the 1st Business Day before the date on which the notice to be sent
to shareholders, CDC shall provide the Beneficial Owner Report (titled
“List of Beneficial Owners - LOBO”) via download facility which
contains the Registration Details of each Holder within the CDS as of
the end of day on the 5th Business Day before the Notice of G.M. or
other Notices to be sent to the shareholders.
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Bonus Shares
When the Board of Directors of an issuer of Book Entry Securities
recommends bonus issue on such Book Entry Securities, the issuer will
forthwith but in any event before book closure date notify the CDC:
The above Beneficial Owners Report and the Entitlement List will have
the adjustments related to valid Change Registration Details Report as
well as Deposit Approval Transactions & Withdrawal Approval
Transactions which were existing in the Deposit Pending Position and
Withdrawal Pending Position as on the Relevant Time.
Subsequent to Board of Directors approval for the allotment of bonus
shares, issuer to:
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The issuer shall forthwith notify the CDC once the bonus shares have
been allotted and registered in the name of CDC. Such notification
should also include the relevant information in respect of, if there is any
variation in the date of allotment of bonus shares and/or in the rate (%)
of the bonus shares allotted, from the previous one which had been
communicated to CDC.
Upon receipt of the above notification the CDC shall credit the integer
bonus entitlement to the respective Accounts and Sub Accounts
immediately after the end of Business Day on which such notice has
been received.
New Issues
The deposit of new issues, declared eligible for the Depository, will be
initiated when the Issuer/Transfer Agent (R/TA) notifies the CDC of the
New Issue and the relevant schedule.
Detailed Procedure
The detailed procedures involved in the transaction are as follows:
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• Account Id, type & title (both for Individual & Corporate
Body)
5. After successful initial upload (with zero error), Issuer / R/TA will
initiate final upload Option in New Issue Module in the Central Depository
System (CDS).
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8. During the EoD process, the system will automatically credit the
securities present in the upload to the respective accounts in the CDS.
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In accordance with CDC Regulation No. 8.B. read with section 14 of the Central
Depositories Act, 1997, the following procedures are prepared in order to handle
“Offer for Sale” transactions through the Central Depository System:
I. Securities already live on CDS and where offerror holds securities in physical
form at the time of offer.
II. Securities not live on CDS at the time of “Offer for Sale” transactions.
3. The Issuer /R/TA, after the completion of the balloting procedures, will
prepare lists of successful applicants. Separate lists to be prepared for
applicants who would have opted to have their securities deposited in the
CDC, on the basis of information available in the application forms.
3. The Issuer / R/TA, after the completion of the balloting procedures, will
prepare lists of successful applicants opted to have their securities directly
to be credited into the CDS according to the information available in the
application. The Issuer / R/TA, using a suitable word processing or text
editing program, will prepare comma-delimited text file containing the data
of successful applicants.
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4. The Issuer / R/TA will execute Initial Upload process in New Issue
Module in the Central Depository System (CDS) to upload the details of
successful applicants opted for directly credit of securities into the CDS.
The Issuer / R/TA will obtain the List of Successful applicants and First
Upload Error List (if any) in order to verify the following Registration
Details with application forms submitted by the applicants at the time of
subscription:
• Account Id, type & title (both for Individual & Corporate Body)
6. After successful initial upload (with zero error), Issuer / R/TA will initiate
final upload Option in New Issue Module in the Central Depository System
(CDS).
7. Issuer will provide the confirmation letter for credit of securities in book
entry form to CDC.
8. Upon receipt of above mentioned letter, CDC will verify contents &
authorised signature(s) & also define credit date into the CDS.
9. During the EoD process, the system will automatically credit the
securities present in the upload to the respective accounts in the CDS.
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2. The Issuer / R/TA, after the completion of the balloting procedures, will
prepare lists of successful applicants. Separate lists to be prepared for
applicants who would have opted to have their securities deposited in the
CDC, on the basis of information available in the application forms.
3. The Issuer / R/TA, after the completion of the balloting procedures, will
prepare lists of successful applicants opted to have their securities directly
to be credited into the CDS according to the information available in the
application forms.
4. The Issuer / R/TA will execute Initial Upload process in New Issue
Module in the Central Depository System (CDS) to upload the details of
successful applicants opted for directly credit of securities into the CDS. The
Issuer / R/TA will obtain the List of Successful applicants and First Upload
Error List (if any) in order to verify the following Registration Details with
application forms submitted by the applicants at the time of subscription:
• Account Id, type & title (both for Individual & Corporate Body)
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6. After successful initial upload (with zero error), Issuer / R/TA will initiate
final upload Option in New Issue Module in the Central Depository System
(CDS).
7. Issuer will provide the confirmation letter for credit of securities in book
entry form to CDC.
8. Upon receipt of above mentioned letter, CDC will verify contents &
authorised signature(s) & also define credit date into the CDS.
9. During the EoD process, the system will automatically credit the
securities present in the upload to the respective accounts in the CDS.
Merger
Scenario I
Upon receipt of Notice along with the certified true copy of scheme of
amalgamation and order of the competent authority, from the transferee co.
CDC will define Book Closure period and swap ratio of merger for security ‘A’
into CDS, for determining the entitlements.
• Upon commencement of book closure period, CDC will restrict the following
functionalities for security of company ‘A’:
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• On the close of 5th business day after commencement of Book Closure period
(relevant time), CDC will provide Merger Entitlement Report for company ‘B’
(reflecting new holding on swap ratio basis including fraction entitlements*, if
any) while Issuer will obtain beneficial owners report (titled “Share Book
details”) of company ‘A’ on his own CDS terminal via “Share Book Detail”
option in “Report and Queries”.
• Upon receipt of allotment notice of securities from Issuer, CDC will define the
apply date (if required) and CDS to automatically credit the entitled number of
securities of company ‘B’ as per entitlement report to respective accounts
and/or sub-accounts on apply date.
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Scenario II
• Merger of Company ‘A’ and Company ‘B’ forming new company ‘C’
• Both companies (company ‘A’ and company ‘B’) are live on CDS while
company ‘C’ is declared as an eligible security.
Detailed Procedure:
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• Company ‘A’ is already live security on CDS whereas company ‘B’ will be
declared as an eligible security prior to de-merger process.
Detailed Procedure:
CDC will define book closure period & ratio of de-merger (for
crediting the new shares in new company ‘B’ and reducing of
shares of existing company ‘A’ within CDS) into CDS, for
determination of entitlements.
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Detailed Procedures:
• Issuer is required to notify us the Book Closure start and end date,
details of consolidation / sub-division and to provide certified true copy
of Special Resolution (Form 26) filed by the company to the Registrar
of Companies.
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• After the end of day, preceding the apply date (consolidation/ sub-
division date), CDC will obtain list of shareholders for internal record
purposes.
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Detailed Procedure:
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For this purpose Issuer / R/TA will be required to provide the following fields
on Letter of Renunciation.
• CDC Participant Id or CDC Investor Services A/c Id
• House account # or Sub account # or CDC Investor account #.
6. The Issuer / R/TA will execute Initial Upload process in New Issue
Module in the Central Depository System (CDS) to upload the details of
successful applicants opted for directly credit of Rights into the CDS. The
Issuer / R/TA will obtain the List of Successful applicants and First Upload
Error List (if any) in order to verify the details provided in the Letter of
Rights. Particpant ID (both for Individual & Corporate Body)
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8. After successful initial upload (with zero error), Issuer / R/TA will initiate
final upload Option in New Issue Module in the Central Depository System
(CDS).
9. Issuer will provide the confirmation letter for credit of right securities in
book entry form to CDC.
10. Upon receipt of above mentioned letter, CDC will verify contents &
authorised signature(s) & also define credit date into the CDS.
11. During the EoD process, the system will automatically credit the
securities present in the upload to the respective accounts in the CDS.
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receipt of which CDC will cancel the holding reflecting in Company’s CDS
account through Stock Adjustment functionality.
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1. Issuer will be required to notify us the following details when TFCs going
to mature or early redemption:
2. Accordingly CDC will record final book closure period on the Central
Depository Registrar (CDR).
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4. CDC will make available beneficial owners report as per schedule for
payment of final redemption amount.
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Apart from its core operations, CDC also provides some value added
services, brief detail of which is as follows:
Trustee Operations
CDC commenced Trustee Business Operations from March 01, 2002 by
acting as Trustee for open-end & Closed-end mutual funds.
INTERNATIONAL AFFILIATIONS
CDC also represents Pakistan on international desk and is a member of
renowned international capital market associations like
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CHAPTER 5:
5.1 – Conclusion
5.2 - Recommendation
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5.1 - Conclusion:
Now in the end, I believe that we have very deeply understood the nature,
business & functions of CDC. We have gone through the basics of capital
market, its fundamentals and ingredients, the CDC, its role & functions and the
CDS.
5.2 - Recommendation:
Keeping the current situation of stock market, I also believe that this information
is now vital for public in analyzing the position of CDC. It is common
misunderstanding now a day that shares which are kept with CDS elements i.e.
with Participants are safe as these are in CDS. This is wrong & disastrous
approach. Shares which are kept with brokers are free to move by them as the
agreement for their movement is being signed by shareholder and participant.
CDC has nothing to do with it as it can only facilitate the book entry transfers.
Only shares which are kept with CDC directly in IAS, those are safe as the
shareholder have authority to move it.
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