DELIVERY AND SETTLEMENT

Once the transaction of purchase or sale of security is executed, the
same gets completion on delivery and settlement thereof. If a company
has not yet been entered in the Central Depository System(CDS), the
delivery of its shares is performed manually in physical form, otherwise
the same is done electronically throughCDS as operated by a separate
company namely Central Depository Company of Pakistan Limited
(CDC).
11.1 Central Depository System (CDS)
The system of electronic book-entry of securities i.e. CDS has been set up
to eliminate physicalmaintenance and transfer of securities.
This system is in line with the international practice and
has replaced the manual system of physical handling and
settlement of shares at stock exchanges.Within the CDS,
transfer of shares from one account to another account
takes place electronically.
TheCDS is managed by theCentral Depository Company of Pakistan Limited
(CDC), which has been sponsored by the stock exchanges and leading local
and foreign financial institutions. Established under the Central Depositories
Act, 1997, CDC has emerged from an elementary settlement agency to a
full fledged depository. It has revolutionalized the financialmarket by making
trading and settlement of securities transparent, reliable, efficient and secure
in eliminating risks.
Following are the core advantages of the CDS:
• Electronic book entry system
• Records and transfers securities electronically.
• No physical change of hands of securities.• Strict confidentiality
• No risk of damaged, lost, forged and duplicate securities.
• Simple procedure involved in pledging of securities.
• No delays in delivery, settlement and transfer of securities due to speed.
• Instantaneous credit of entitlements (Bonus, PaidRights, etc.) to investors.
• Significantly reduced the cost of investors.
An investor can use any of the three types of CDC accounts, which are
described as below with their features:-
i. Sub-Account:
A broker may open, maintain and operate any number of sub-accounts
he requires on behalf of his clients. A specific sub-account is used for
keeping securities belonging individually to that particular client of the
broker.
ii. Group Client Account:
This account is used for keeping securities which are beneficially owned
by the broker’s clients who are not willing to utilize
the facility of opening separate sub-account. The
broker groups all such clients in their group account.
The detailed break-up of the securities held by each
client of a group account is maintained by the broker in his back office.
iii. Investor Account:
By opening an investor account with CDC, the client comes with direct
contact of CDC. Such account can only be operated by the relevant
account holder. The service provides efficient, effective and secure
services to its clients.
Out of the above, the most secured and convenient type is the investor
account which is highly recommended to the investors.

11.2 National Clearing and Settlement System (NCSS)
Clearing and Settlement is one of themost important aspects in the operation
of the securities business. It is the process of reporting, matching, correcting
securities transactions and the ultimate delivery or receipt of net balances.
The Karachi Stock Exchange
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NCSS is an electronic system developed to replace the individual Clearing
Houses of Pakistan’s three stock exchanges by a single entity. This system
is operated by National Clearing Company of Pakistan Limited (NCCPL),
which has been registered as a separate legal entity. The operations ofNCSS
are rapidly gaining momentum and so far a majority of the securities have
been inducted into the system for settlement purpose.
NCSS provides stability to the market by capping the systematic risk to a
good extent. It has also improved efficiency of the settlement process by
introducing a consolidated and geographical neutral clearing and settlement
system. NCSS, with its technologically advanced features such as automated
Pay and Collect functionality, introduced extraordinary transparency and
efficiency in the clearing process.