THE REGULATIONS FOR SHORT SELLING UNDER READY MARKET                                  Back to Rules & Regulations Main

ISLAMABAD STOCK EXCHANGE (GUARANTEE) LIMITED

THE REGULATIONS FOR SHORT SELLING UNDER READY MARKET

PREAMBLE

WHEREAS at present there are no regulations to regulate Short Selling under Ready Market.

AND WHRERAS  in order to regulate short selling under Ready Market subject to its proper regulations in  line with the International Practice, it is desirable that necessary Regulations be framed in this regard.

NOW THEREFORE, the ISLAMABAD STOCK EXCHANGE (Guarantee) Limited in exercise of the powers conferred by sub-section I of section 3A of the Securities & Exchange Ordinance, 1969 (XVII of 1969) with prior approval of Securities & Exchange Commission of Pakistan makes the following Regulations namely:

1.     SHORT TITLE & COMMENCEMENT

a)     These  Regulations may be called the “Regulations for Short Selling under Ready Market, 2002”.

b)     These Regulations shall come into force with immediate effect.

2.     DEFINITIONS

In these Regulations, unless the subject or context otherwise requires:

a)     “Blank Sale” means a sale by a party that does not own shares or the sale does not constitute a sale with pre-existing interest or is a sale by a party that has not entered into a contractual borrowing arrangement to meet delivery requirements.

b)     “Board of Directors” means “Board of Directors of the Exchange”.

c)     “Exchange” means “the ISLAMABAD STOCK EXCHANGE (Guarantee) Limited”.

d)     “Member” means “Member of the Exchange”.

e)     “Prior Contractual Borrowing arrangement ” means shares already borrowed or a contract or agreement to borrow shares needed to make delivery on the settlement date.

f)       “Short Sale”  means a sale by a party that does not own shares or the sale does not constitute a sale with pre-existing interest but is a sale by a party that has entered into a contractual borrowing arrangement to meet delivery requirements.

g)     “Sale with pre-existing interest” means:

·         The squaring up of an earlier purchase on the same exchange in the same settlement.

·         The squaring up of an earlier purchase on the same exchange in a different settlement which will settle prior to the settlement of the sale.

·         The squaring up of an earlier purchase on another exchange in a different settlement which will settle prior to the settlement of the sale.

·         The squaring up of an earlier purchase on another exchange in the same settlement.

h)     “Up tick” is the price which is above the next preceding different price at which a trade of such security was affected on such Exchange for example:

TIME                               RATE                      REMARKS

Previous closing                 19.00

                   A.       10.00 a.m.                        19.05                     Short Sale allowed

                   B.          10.02 a.m.                     19.10                     Short Sale allowed   

                   C.       10.10 a.m.                        19.10                     Short Sale allowed

                   D.       10.11 a.m.                        19.05                     Not allowed

                   E.       10.12 a.m.                        19.05                     Not allowed

                   F.       12.00 a.m.                        19.50                     Short Sale allowed

                   G.       12.05 a.m.                        19.45                     Not allowed

                   H.       12.10 a.m.                        18.90                     Not allowed

                   I.        12.15 a.m.                        18.95                     Short Sale allowed

SHORT SELLING

3.      Short Sale under Ready Market shall take place through the Computerized trading system (ISE-ETS).

PROHIBITION ON BLANK SALES

4.      Blank sales are not permissible.

SHORT SALE PREREQUISITES

5.      No person shall make a Short Sale unless:

a)     Prior contractual borrowing arrangement has been made.

b)     The sale is made at an uptick, and

c)     The trade is identified as a Short Sale at the time of placement of order.

6.      Short Seller will have to declare Short Sale transactions while placing the order in the system in the manner and procedure as may be prescribed by the Exchange from time to time. This identification would be at the trade level to the Exchange, which would then disclose the cumulative figures for public consumption at the close of market everyday.

7.      Short Seller will have to make delivery of the net shares involved in the short selling on the day of settlement.

8.      (a) Short sales are only allowed in CDS designated securities of highly liquid scrips based on a pre-

determined criteria based on Volume and Market Capitalization. Such list would be announced by

the Exchange from time to time.

(b)          The currently eligible securities for short selling are shown in Annexure “A” (under preparation)

PROHIBITION

9.      No person shall be allowed to carry over the short position through transactions governed by Carry Over Transaction (COT) Regulations .

10.  No person, who has financed COT against delivery of shares, shall use the same shares for Short Selling and/or further lending.

PENALTY

11.  (a)          The Exchange shall impose penalties as may be prescribed by the Board of Directors on members 

who are found  violating these Regulations.

(b) The current penalties schedule is attached as Annexure “B” (being finalized).

AMENDMENTS IN REGULATIONS

12.  The Board may, with the prior approval of the Securities and Exchange Commission, make changes in these Regulations after giving reasonable notice.