Overview, Functionalities and
Products
NCCPL
NCCPL’s
Overview
BACKGROUND
NCCPL – NCSS Design

In March 1999 the Capital Market Project Consultants (Arthur Anderson
& Co.) were mandated to develop recommendations for a National
Clearing and Settlement System (NCSS).

Accordingly various committees were formed comprising of
representatives from the three Stock Exchanges, CDCPL and Market
Participants.

Based on recommendations submitted by consultants, deliberation of
the committees and subsequent approvals from the three Stock
Exchanges and SECP, System design was finalized in October 2000.
Overview

National Clearing Company of Pakistan Limited (NCCPL) was
incorporated on July 03, 2001 to manage and operate the National
Clearing & Settlement System (“NCSS”) in a fully automated
electronic settlement system.

The operations of NCCPL are governed by the following
legislations:







Clearing House Companies (Registration and Regulations)
Rules 2005;
Securities (Leverage Markets and Pledging) Rules 2011;
NCCPL Regulations;
NCSS Procedures;
Companies Ordinance, 1984; and
Income Tax Ordinance 2001
The Board of the Directors comprises of 11 Directors of which 9 are
appointed by the shareholders,1 is nominated by the SECP and the
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CEO by virtue of his office.
Overview


The Company has voluntarily adopted the Code of Corporate
Governance to implement good governance practices. These
inter-alia include:

Forming an Audit Committee of the Board comprising of nonexecutive directors

Appointment of Chief Internal Auditor, Chief Financial Officer and
Company Secretary by the Board;

Holding the number of the Board Meetings as recommended by the
Code;

Issue of Quarterly, Half yearly and annual financial statements
The Company also has a I.T. Steering Committee;

This Committee Comprising of IT experts from stock exchanges and
Financial Institutions Deliberate IT related strategies and policies
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National Clearing and
Settlement System
(NCSS)
6
National Clearing and Settlement System NCSS

NCCPL, being the leading post trade service provider in
the country, is continuously introducing diversified
products and services which are conducive to the
development of the capital market.

Following are the key features of the centralized NCSS:
Balance Order T+2 rolling settlement cycles with
multilateral netting;
Automated Pay & Collect by direct debit and credit in
the settling bank accounts;
No physical receipt / issuance of instruments;
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Cont…
National Clearing and Settlement System NCSS
 Automated process of securities settlement directly
between Clearing Members (CM);
 Cross Exchange Netting for both cash & securities for
CMs who are members of more than one Stock
Exchange;
 Settlement of net obligations directly between CMs as
per undisclosed Balance Orders;
 Clearing and Settlement of non-broker institutions for
trades/transactions
directly
with
NCSS
Institutional Delivery System (IDS) Module
through
Cont..8
National Clearing and Settlement System NCSS
 Settlement of Broker-to-Broker Transactions directly with
NCSS to facilitate transactions executed between brokers of
the different exchanges;
 Direct securities move-in and move-out on the basis of CDS
accounts based on Unique Identification Numbers;
 Complete Straight-through-Process in the settlement process,
without involving of any manual intervention.
 All three core systems of the Capital market; namely Trading
systems, Clearing system (NCSS) and the Depository system
(CDS) are linked in such a manner that UIN is serving as the
“Primary Key”.
 Securities are transferred directly into the Investors’ CDS
Accounts i.e. “Beneficiary to Beneficiary” account basis.
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NCSS Controls and Checks
Movement of Securities:
 Bought securities are delivered to buying CMs’ CDS subaccount and/or house-accounts in blocked status. Blocked
securities are available to buying CMs after discharging their
obligations.
Short Deliveries Debits:
 In case of short deliveries, system additionally debits CMs’
accounts with the previous day Closing Prices (i.e., System
Prices) with 15% margin of late/fail deliveries.
Retrieval Securities:
 In case of money default by CM, blocked securities in his CDS
main account are retrieved by NCCPL for selling-out.

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NCSS - Operational Highlights
Highest Ever
Maximum Number of Balance Orders (BO’s).
28,609
Maximum Volume of Shares.
314.9 (M)
Maximum Value of Shares.
24.83 (B)
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Clearing Members in NCSS
Broker Clearing Members
269
Non-Broker Clearing Members
135
Custodian Clearing Members
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Total
408
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Eligible Securities
600
500
400
300
200
100
0
565
498 469 529
467
Live (Total)
BTB
MF
IDS
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32
Debt Market
MTS
SLB
No. of Eligible Securities
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S. No
Settling Bank
Statistics
Karachi
Lahore
Islamabad
Total
1
Allied Bank of Pakistan Limited
a
r
a
2
2
Askari Bank Limited
a
r
r
1
3
Bank Al Habib Limited
a
a
r
2
4
Bank Al - Falah Limited
a
a
a
3
5
Bank Islami Pakistan limited
a
r
r
1
6
Citibank N.A.
a
r
r
1
7
Deutsche Bank AG
a
r
r
1
8
Habib Bank Limited
a
a
r
2
9
Habib Metropolitan Bank Limited
a
r
r
1
10
JS Bank Limited
a
r
r
1
11
KASB Bank Limited
a
a
r
2
12
MCB Bank Limited
a
a
a
3
13
NIB Bank Limited
a
r
a
2
14
National Bank of Pakistan
a
r
r
1
15
Silk Bank Limited
a
r
r
1
16
Sindh Bank Limited
a
r
r
1
17
Soneri Bank Limited
a
r
r
1
18
Summit Bank Limited
a
a
a
3
19
Standard Chartered Bank (Pakistan) Limited
a
r
r
1
20
United Bank Limited
a
20
r
6
r
5
1
14
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Total
Settlement Flow in NCSS
Buying Broker
T
Selling Broker
Execution of Trades at the
Stock Exchange
Online trade feed to NCSS
Generation of NE Transactions
Netting of trades
T+1
SD-1Payment orders and Delivery Receive order
Money Receive orders and Delivery
order
Delivery of NCSS eligible securities
(with blocked status)
Buying Broker
Selling Broker
Unblocking of securities on Payment
Confirmation
T+2
Collect Payment
Payment to NCSS
Release Payment
SD
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Settlement Options
Balance Order
Multilateral Netting Based
on CDS Accounts and UINs
T+2 Settlement Cycle
T+1 Settlement Cycle
Achievements, Products
& Services
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Achievements, Products & Services
Registration under Clearing House Companies (Registration and
Regulations) Rules 2005 in March 2006
Appropriation of Rs 100 million as initial contribution towards
Clearing and Settlement Fund as required by the above Rules
Formation of Clearing & Settlement Fund Trust
Establishment of DR/BC Site along with Branch office
Implementation of Unique Identification Number Registration through
NCSS.
Implementation of Financial Institutions Risk Management Delivery
System (IDS) functionality to Institutions.
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Achievements, Products & Services
Introduction of Inter-Exchange Trading Mechanism
Modifications in NCSS to facilitate Unified Trading System (UTS)
Platform for LSE and ISE members for execution of their trade and
transaction on the same UTS.
Introduction of collection and disbursement mechanism of marked-tomarket losses and profit for Futures Market through NCSS Pay &
Collect Functionality.
Dissemination of FIPI and LIPI Information to Market Participants
through NCCPL’s Website.
Clearing, Settlement and RMS of BATS
Automation of Securities Settlement
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Achievements, Products & Services
Registration of Employees of Brokerage Houses through NCSS
UIN Functionality
Inter-Bank Fund Transfer Facility (“IBFT”)
Registration of Employees of Brokerage Houses through NCSS
UIN Functionality
Direct Clearing & Settlement Facility for Custodian Banks
through IDS
Acquired the Status of an Authorised Intermediary for Leverage
Markets
Implementation of UIN Information System (“UIS”).
Introduction of Trade-for-Trade Settlement for BATS along with
Revised RMS
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Achievements, Products & Services
Pre-Settlement Delivery Mechanism.
Implementation of Reporting Platform for Un-Listed TFCs
Clearing & Settlement of Negotiated Deal Market (NDM)
Market
United Kingdom Accreditation Services (UKAS), the
accreditation body, has granted ISMS Certification as per
ISO 27001:2005.
Computation, Determination and Collection of Capital Gain
Tax (“CGT”)
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Achievements, Products & Services
Leverage Market Products
Margin
Trading System
Margin
Financing System
Securities
Lending & Borrowing
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Brief Overview of UIN Functionality
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Brief Overview of UIN Functionality
Client Types in NCSS

Individual Pakistani Citizen.

Individual Foreigner/overseas Pakistani citizens/NonPakistani residing in Pakistan.

Non-individuals;
i.
Corporate/individual – Broker.
i.
Corporate – Company.
i.
Corporate – fund/other organization.
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Brief Overview of UIN Functionality
Benefits of UIN Implementation

Enable Brokers to register their clients by assigning Unique code to
manage their business efficiently and effectively.

Provide Traceable Links for all Trades and Transactions executed in
the Capital Market of Pakistan.

Provide great relief and facilitation in monitoring compliance and
surveillance of relevant Rules and Regulations by the Apex and
Front Line Regulators.

Provides facilitation to the Stock Exchanges to implement effective
risk management measures.

Provide facilitation to various Govt. Agencies in investigation and
inquiries.

Provides great relief to the market participants to synchronize their
Back Office records.
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Brief Overview of UIN Functionality
Benefits of UIN Implementation

Provides facilitation to the Central Depository Company (“CDC”) to
create a logical linkage between CDS Account Holders and
Investors.

Provides facilitation to the Mercantile Exchange for the registration
of Commodities Investors.

Provides effective control over Pledging of Securities with the
Banks by Market Participants.

Bring very useful information for the Capital Market of Pakistan by
disclosing Foreign and Local Investors Portfolio on a daily basis,
commonly known as “FIPI” and “LIPI”.

Without having UIN Functionality “Automation of Securities
Settlement” mechanism could not be implemented

Without having UIN Functionality “Client Level Margining System”
could not be implemented at the Stock Exchanges.
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Brief Overview of Financial Institutions
(FIs) Risk Management System
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Brief on (FIs) Risk Management System

All NBCMs are required to affirm Auto-Initiated Institutional
Delivery System (“IDS”) transactions based on their trades
executed through brokers on the UINs of such NBCMs.

Upon affirmation of IDS transactions, NCCPL shall collect Value
at Risk (VaR) based margins against exposure & Mark-to-Market
(MTM) losses from NBCMs.

All NBCMs are required to pay collateral against exposure
margin & MTM losses to NCCPL with in stipulate time .

Collateral shall be in the form of cash, Approved Securities,
Bank Guarantee or Irrevocable Undertaking.

The Exchange(s) will adjust the exposure of their Brokers based
on the information, provided by NCCPL.
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Brief on UIN Information System (UIS)
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Brief on UIN Information System (UIS)

In order to bring transparency in capital market and to prevent any
misuse of UINs, NCCPL has implemented UIN Information System
(“UIS”) .

Directly accessible to UIN holder whereby each investor can be able to
monitor all activities carried out on their UIN in stock exchanges.

The said system enables investor to view their all trading, settlement
and UIN / Client Code registration data with their respective brokers
through dedicated User ID and Password to log on into the web-based
application exclusively developed for such system.

UIS provides great value to the Company with reference to bring
transparency in the capital market along with investors’ confidence.
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Brief Overview of Leveraged
Products
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Brief Overview of Leveraged Products
In order to generate liquidity in the capital
markets of Pakistan, following new leveraged
products have been introduced under the
Securities (Leveraged Market and Pledging)
Rules, 2011:
Margin
Trading System (“MTS”) effective from March 14,
2011;
Financing System (“MFS”) effective from March 14,
2011; and
Margin
Securities
Lending and Borrowing
effective from March 21, 2011.
System
(“SLB”)
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Brief Overview of Leveraged Products
Salient features of Margin Trading System (“MTS”)

Financing in MTS is only be made available on pre-identified ready
market purchases termed as ‘Leverage Buy’.

MTS is an undisclosed market for Financees and Financiers.

The maximum mark-up rate in MTS Market is KIBOR+8%.

All transactions executed in MTS Market are based on Financing
Participation Ratio (“FPR”) i.e. equity participation by Financees.

Equity participation to be paid by the Financee for the settlement of
each MT Transaction is 15% of MT Transaction Value. Whereas,
Trading Financier is required to settle 85% of MT Transaction Value on
respective settlement date.
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Brief Overview of Leveraged Products
Salient features of Margin Trading System (“MTS”)

Financees are required to pay Marked-to-Market (MtM) losses to
NCCPL on daily basis in Cash only till the settlement of the entire MT
Contract.

Such MtM losses will be paid to the respective Financiers on daily
basis.

Financiers are required to open a separate MT Blocked Account in CDS
for movement of MT Financed Securities.

Each MT Contract shall not exceed from sixty (60) calendar days.
However, on every fifteenth (15th) calendar day, MTS will automatically
release one fourth quantity of the MT Contract Value.
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Brief Overview of Leveraged Products
Salient features of Margin Trading System (“MTS”)
 Rollover of MT Contract is allowed in MTS.

Risk management measures such as exposure margins, concentration
margins, and MTM are applied on all MT Contract.

Capital adequacy limits and position limits are also applicable on
Financiers and Financees in accordance with the Regulations.
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Brief Overview of Leveraged Products
Salient features of Margin Financing System (“MFS”)

Margin Financing (MF) facility is made available to all brokers
against net ready market purchases of their clients and
proprietary positions.

MF can be obtained as per agreed Financier Participation Ratio
(FPR). However, minimum of 25% or VaR whichever is higher
should be contributed by financee.

Financing terms and conditions are pre-determined by Margin
Financee and Margin Financier.

NCCPL provides a system to MF Participants for recording and
settlement of MF Transactions.

All MF Transactions are based on counterparty
disclosed manner.
risk in a
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Brief Overview of Leveraged Products
Salient features of Securities Lending and Borrowing
System (“SLB”)

SLB is defined as the temporary exchange of securities with an
obligation to redeliver the same securities in the same number
and at an agreed premium on a future date.

The motivation for lenders is to earn income/return on their Idle
Securities.

The borrowers may utilize SLB functionality to avoid delivery
failure in ready market or to make a short sale.

SLB is done through an automated platform provided by
NCCPL to lenders and borrowers for placing offers and bids
on un-disclosed manner.
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Brief Overview of Leveraged Products
Salient features of Securities Lending and Borrowing
System (“SLB”)
 The Premium of SLB is capped to KIBOR+8%.

SLB Contract period is maximum for 22 working days.

On Settlement Day, the lender delivers the lended securities
and borrower pays the total amount of borrowed securities.
38
Brief on the Computation and Collection
of Capital Gain Tax (CGT)
39
Brief on the Computation and Collection of Capital Gain
Tax (CGT)
 The SECP as a part of its mandate to develop Capital Market in
Pakistan, forwarded a proposal to the Federal Board of Revenue
(“FBR”) for Revamping of CGT Regime.
 CGT Rules have been revised though the promulgation of
Finance (Amendment) Ordinance, 2012 effective from April 24,
2012.
 Accordingly, NCCPL shall be Responsible to Compute,
Determine and Deposit CGT to FBR.
 Following are the Persons/Investors to which new CGT Regime
will be applicable by NCCPL:



Individual Investors;
Brokers; and
Corporate Entities.
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Brief on the Computation and Collection of Capital Gain
Tax (CGT)
 Following Persons/Investors will NOT be covered under new
CGT Regime by NCCPL:
• Mutual fund;
• Banking Company;
• Non-Banking Finance Company;
• Insurance Company;
• Modaraba;
• ‘Foreign Institutional Investor’ being a person registered
with NCCPL as a foreign institutional investor; and
• any person or class of persons as notified by the FBR.
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Thank you !
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