REGULATIONS GOVERNING ASSOCIATE MEMBERSHIP OF ISE CLEARING HOUSE

PREAMBLE

Whereas in order to provide a reasonable degree of comfort and for maintaining proper risk management in the manner of Carry Over Transaction (COT) conducted by the Non-Member banks, financial institutions and companies the Islamabad Stock Exchange has decided to allow Associate Membership of its Clearing House to the Non-Member approved banking, financial institutions and companies as per criteria laid down for the purpose.

Now, therefore, in exercise of the powers vested under the Rules and Regulations, the Board of Directors of Exchange, with prior approval of Securities & Exchange Commission of Pakistan (SECP) as required under Section 34(1) of the Securities & Exchange Ordinance 1969, makes these Regulations which shall be deemed to have come into force at once.

1) SHORT TILTLE

These Regulations shall be called “ Regulations Governing Associate Membership of ISE Clearing House”.

2) DEFINITIONS

In these Regulations, unless subject or context otherwise required:

(a) “Exchange” means “ The Islamabad Stock Exchange (Guarantee) Limited”.

(b) “Board” means “ Board of Directors of the Islamabad Stock Exchange (Guarantee) Limited”.

(d) “Associate Member” means “ a Non-Member Banking company, a Non-Banking Financial Institution, Investment Company, Unit Trust Scheme, Pakistan Insurance Corporation, National Insurance Corporation and State Life Insurance Corporation, admitted as a Member of the Clearing House of the Exchange only for the purpose of executing their deliveries and settlement obligations in relation to their COT Transactions conducted through a Member of the Exchange”.

(e) “Clearing House” means “ the Clearing House of the Islamabad Stock Exchange operating under the Clearing House Procedures Manual”.

(f) “Rules & Regulations” means “ Rules & Regulations dealing with Clearing and Settlement, Default and Risk Management aspects of the Exchange”.

(g) “ISECTS” means “ The Islamabad Stock Exchange Computerized Trading System”.

(h) COT Transaction” means “ Transactions as defined under the Carry Over Transactions Regulations executed through ISECTS”.

3) ELIGIBILTY FOR THE ASSOCIATE MEMBERSHIP

The Associate Membership of the Clearing House will be available only to a Non-Member Banking company, a Non-Banking Financial Institution, Investment Company, Unit Trust Scheme, Pakistan Insurance Corporation, National Insurance Corporation and State Life Insurance Corporation subject to the terms and conditions as may be laid down for the purpose by the Board.

4) ADMISSION TO THE ASSOCIATE MEMBERSHIP

The application for the Associate Membership may be made on the prescribed application, attached hereto as per Annexure “A” alongwith an Undertaking as per Annexure “B”. On completion of all the relevant requirements and approval of the Board, the applicant will be admitted as the Associate Member of the Clearing House.

5) PRIVILEGES ON ADMISSION TO THE ASSOCIATE MEMEBRSHIP OF THE CLEARING HOUSE

On admission to the Associate Membership of the Clearing House, the applicant will be entitled only to the following privileges:

(a) The applicant will become an Associate Member of the Clearing House of the Exchange subject to the Rules & Regulations applicable in this behalf.

(b) The Associate Member shall be directly responsible for its clearing & settlement obligations with the Clearing House of the Exchange.

(c) The Associate Member shall be treated at par with the Members of the Exchange in the matter of settlement of their claims as well as distribution of losses in the event of default by a Member of the Exchange in accordance with the relevant Rules & Regulations.

(d) The Associate Member shall not be liable for payment of exposures and marked to market differences under the relevant Rules &Regulations, Clearing House Deposit and Service Charges (laga) payable to the Exchange. These shall be the responsibility of the Members of the Exchange through whom such Associate Member is conducting trading at the stock market.

6) OBLIGATIONS OF THE ASSOCAITE MEMEBR

(a) The Associate Member will have to enter into trades with a Member of the Exchange through the ISECTS. Such Member will be responsible for deposit of the margin requirements with the Exchange in accordance with his/its obligations calculated on the basis of outstanding business in accordance with the relevant rules & Regulations.

(b) The Associate Member will issue its COT obligation payments to the Clearing House of the Exchange through branches of the banks located in the Exchange premises. The Clearing House will transfer the shares to the COC Account nominated by the Associate Member. Conversely, when the Associate Member will have to release its COT trade it will paid by the Clearing House and such Associate Member will transfer the shares to the Clearing House.

(c) The Associate Member shall be fully responsible for all clearing and settlement obligations of all outstanding business in its account maintained with the Exchange in accordance with the relevant Rules & Regulations governing the clearing operations.

(d) The Associate Member shall not release shares deposited with it under the COT transactions for re-lending or short selling purposes.

7) CHANGES IN THE REGULATIONS

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

ANNEXURE “A”

FORM OF APPLICATION FOR

ASSOCIATE MEMEBERSHIP OF CLEARING HOUSE

The Secretary

Islamabad Stock Exchange (Guarantee) Ltd.

Stock Exchange Building

101-E, Anees Plaza, Blue Area

Islamabad.

Dear Sir,

We hereby apply for the Associate Membership of the Clearing House of the Islamabad Stock Exchange (Guarantee) Limited in accordance with the Regulations Governing Associate Membership of ISE Clearing House.

We are enclosing herewith the following documents required for the purpose:

i. Memorandum and Articles of Association.

ii. A resolution adopted by the Board of Directors to become Associate Member of

the Clearing House.

iii. A list of the Directors of the company.

iv. An Unconditional Undertaking under the Common Seal of the company duly signed on the prescribed format.

We hereby undertake to abide by the Regulations Governing Associate Membership of ISE Clearing House which are in force or may be amended from time to time by the Exchange.

Yours faithfully,

_______________

Chief Executive.

ANNEXURE “B”

FORM OF UNCONDITIONAL UNDERTAKING

(FOR ASSOCIATE MEMEBRSHIP OF CLEARING HOUSE)

In pursuance to the Regulations Governing Associate Membership of ISE Clearing House of the Islamabad Stock Exchange (Guarantee) Limited, we having our registered office at hereby undertake and bind ourselves as under:

1. That we undertake to comply the requirements under the Regulations Governing Associate Membership of ISE Clearing House.

2. That we agree to conduct only COT transactions through our associate Membership of Clearing House.

3. That we understand our Associate Membership does not confer any trading rights on the Exchange.

4. That we undertake to conduct all our COT transactions through a Member of the Exchange within their approved Capital Adequacy limits.

5. That we undertake to fulfill all our obligations as laid down under the Regulations viz-a-viz the Exchange as well as the Members of the Exchange through whom we will be conducting our day-to-day trading operations on the Exchange.

Yours faithfully,

Chief Executive/Authorized person Common Seal of the Company