CENTRAL DEPOSITORY COMPANY

CENTRAL DEPOSITORY COMPANY (CDC)

It is incorporated as a public limited company (unlisted) in 1993 Central Depository Company of Pakistan Limited is the only depository in Pakistan. The company started operations in September 1997. CDC is the sole entity handling the electronic (paperless) settlement of transactions carried out at all three stock exchanges of the country.

CENTRAL DEPOSITORY SYSTEM (CDS):

The central depository system is an electronic book entry system to record and transfer securities. This system changes ownership of securities without any physical movement of certificates or necessity for execution of transfer deeds. The CDS is normally operated by a Central Depository Company (CDC) which records and transfers the beneficial ownership of securities. CDC may be termed as a Shares Bank.

FUNCTIONS OF CENTRAL DEPOSITORY COMPANY (CDC):

CDC was primarily established to operate the Central Depository System (CDS) for equity, debt and other financial instruments that are traded in the Pakistani capital market. The main function of CDC is to operate and maintain the Central Depository System (CDS), drawing guidance from a well-defined legal framework laid down by Securities & Exchange Commission of Pakistan (SECP). Installed by an IBM-led consortium, CDS is 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 & Preference shares, TFCs, WAPDA Bonds, Sukuk, Open-End & Closed-End funds and Modaraba Certificates. The other functions of CDC include: 1. Deposit of existing and new securities into the depository. 2. Withdrawal of securities in the form of certificate from the depository to cater for investors who prefer to have physical possession of certificates. 3. Free transfer- book entry transfer of securities without any associated cash movement. 4. Pledge / release / call - placing a lien on securities in favor of a lender, this can only be released / called by the lender. 5. Stock borrowing or lending through the mechanism of transfer with or without associated money movement through the depository system. 6. Corporate action - bonus issues, rights entitlements, sub-division, consolidation and any other action that changes the number of securities held in a participant's account or involve the determination of entitlement to beneficial owners.

FINANCIAL MANAGEMENT POLICY

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BENEFITS OF ELECTRONIC SETTLEMENT CENTRAL DEPOSITORY SYSTEM (CDS):

THROUGH

Following are some of the benefits of electronic settlement of securities through CDS: Reduced workload and manpower requirements due to paperless settlement. Instantaneous transfer of ownership. No stamp duty on transfers in CDS. No risk of damaged, lost, forged or duplicate certificates. No impact in case of sudden increase of settlement volumes. Instant credit of corporate entitlements (bonus, rights and new issues). Paperless environment (no traditional vaults). Secure custody of securities. Substantial reduction of paperwork during book closure. Convenient pledging of securities. Substantial reduction in time & capital investments.

DRAWBACKS OF CENTRAL DEPOSITORY SYSTEM:

Following are the drawbacks of electronic settlement of securities through CDS: Early withdrawal fees is charges when withdrawal of cash before CDS maturity occurs. Physical certificates are converted into electronic form eliminating notable features of certificates, i.e. distinctive number, folio number or certificate number. Securities become identical and interchangeable.

FINANCIAL MANAGEMENT POLICY

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