The Securities and Exchange Commission of Pakistan (SECP) has approved amendments to the National Clearing Company Pakistan Limited (NCCPL) Regulations 2015 to introduce reforms in Margin Financing (MF) product, which allows securities brokers to provide financing to their customers in a regulated manner. According to a statement, these reforms will facilitate investors who wish to undertake leveraged trading and need finance for purchasing shares. As a result of these reforms, position limits and exposure limits have been liberalised to allow more liquidity. Margin financing facility will now also be available to investors against their net purchases at expiry of deliverable futures contracts period which will facilitate investors to honour their settlement obligations in futures segment, thereby further reducing settlement risk. Further, in consideration of meeting funding needs of investors, the MF facility will now be available on T+1 against their net purchases in the Ready Market segment. Moreover, MF financiers can now collect MTM losses in any manner mutually agreed under the financing agreement signed with the borrower instead of the earlier stipulated mandatory collection of MTM losses in cash only in case of 5% decline in MF financed security value. Further, the brokers that meet specified eligibility requirements shall be allowed to pledge 75% MF financed securities in favour of NCCPL to fulfil margin requirements against exposure in the Ready Market. Lastly, MF financiers will be allowed to release an MF transaction and rollover with revised MF transaction value after adjusting MTM losses and any payment received from their investors, said the statement. According to the statement, the aforementioned reforms have been approved after due consideration to any incremental risks and implementation of appropriate risk mitigating features, and were finalised as a result of comprehensive stakeholder consultation. Deliverable futures contracts For the first time in Pakistan, the Securities and Exchange Commission of Pakistan (SECP) has approved the introduction of 90 days Deliverable Futures Contracts (DFC). According to a statement, this will allow investors to take positions in futures contracts with 30 days, 60 days and 90 days maturity; thereby providing market participants with multiple options and flexibility to suit their particular investment strategies. Previously, investors could only roll over their positions during the last week of the month, also known as the rollover week. As per the new features, investors would be able to rollover their positions at any time they desire, thus reducing the pressure in rollover week and curtailing risk in the market. As a part of the reform process in DFC, the eligibility criteria have also been refined to align the same with international best practices and bring more liquidity. The revision is carried out in a manner to strike a balance between providing market participants with more investment opportunities while also ensuring that only liquid scrips are part of DFC universe. The changes are introduced with corresponding improvements in risk management regime to address any resultant risk and ensure smooth capital market operations. The new contracts will be opened for trading by Pakistan Stock Exchange in the last week of July 2021. The aforementioned reforms have been approved after due consideration to any incremental risks and implementation of appropriate risk mitigating features, and were finalised as a result of comprehensive stakeholder consultation, said the statement.