CDC pushes capital market development to the countryside
As the only central depository in the country, the Central Depository Company (CDC) plays a crucial role in the overall development of Pakistan’s capital markets.
But although there has been extensive progress in this direction, a lot of work still needs to be done especially in terms of participation in the capital markets among investors in the countryside.
In this regard, the CDC is playing an important role in terms of developing the country’s capital markets by supporting the opening of “capital market hubs” which provides easier market access for investors in various cities throughout the country.
With its role as securities depository in Pakistan, CDC forms the main infrastructure for the country’s capital markets by providing electronic custody, as well as, transfer and settlement of securities traded on the Pakistan Stock Exchange.
As of September, CDC has 128.83 billion shares with a total value of US$51.0 billion, while total net assets under custody amount to US$6.2 billion.
“CDC is a participant-driven system whereby we allow all participants to access the system directly from their offices and we allow them to do the activities from their own terminals. CDC also does several investor awareness roadshows in Pakistan as well as in other cities abroad like London, New York and the UAE,” says Muhammad Hanif Jakhura, chief executive officer of the CDC, which has offices in Karachi, Lahore, and Islamabad.
Since the CDC was launched in 1999, its main function has been to operate and maintain the central depository system (CDS), an electronic book-entry system used to record and maintain securities and to register the transfer of securities.
“The system changes the ownership of securities without any physical movement or endorsement of certificates and execution of transfer instruments. CDS facilitates equity, debt and other financial instruments in the Pakistani capital market. It manages ordinary and preference shares, TFCs (term finance certificates), WAPDA (Water and Power Development Authority) bonds, sukuk, open-end and closed-end funds and Modaraba certificates,” Hanif says.
In addition to operating the CDS, one of the principal objectives of the CDC is to create awareness among local investors in Pakistan on the need to participate in the country’s capital markets.
“We have been trying to create awareness among investors on the need to use the capital markets as their vehicle for investing particularly in fixed income securities issued by the government of Pakistan. That is why we have started to develop the capital hubs – the first one developed in Abbottabad. We are planning to create more capital market hubs so that investors in various cities will be able to participate,” Hanif says.
Also known as the Capital Market Business Hub (CMBH), the CMBH is a collaboration between the CDC and the Securities and Exchange Commission of Pakistan (SECP). It educates investors in smaller cities in the country.
Located in designated second-tier cities, the CMBH is a place where all capital market related activities can be initiated by investors, banks, asset managers, brokers and other institutions. The first CMBH in Abbottabad drew participation from 10 institutions including five asset management companies, two brokerage houses, a stock exchange, one bank and CDC.
With the establishment of the CMBHs, the CDC plays a crucial role in supporting the development of the capital markets in Pakistan.
Even before the establishment of the CMBH, the CDC has been active in raising awareness about the capital markets, particularly among retail investors.
CDC conducts seminars to promote investor protection in markets, and educate investors about their roles and responsibilities, as well as the general operations of CDC and the capital markets.
Another objective of the seminars is to expand participant knowledge regarding asset protection measures and investment safeguards. The seminars so far, have been conducted in Abbottabad, Muzzafarabad, Peshawar, Rawalpindi, Islamabad and Mipur.
The CDC also provides investor account services, trustee and custodial services, share registration services, and other investor portfolio services.