1. Transfer of Risk Management Function from PSX to NCCPL Brief Overview Presented to BCMs April 15, 2016

2. Overview

3.  Presently, the National Clearing Company of Pakistan Limited (“NCCPL”) performs the risk management of for trades/transactions of Ready and Futures Market executed by its Non-Broker Clearing Members (NBCMs) through Financial Institutions Risk Management System (FIRMS)  NCCPL also perform risk management functions for trades which are recorded in Debt and Leveraged Markets by all Clearing Members (CMs).  Risk management of Broker Clearing Members (BCMs) is performed by the Pakistan Stock Exchange (PSX) Overview

4.  With the promulgation of Securities Act, 2015 “the Act”, the NCCPL in accordance with the provisions of the Act, shall perform the entire risk management of capital market trades that includes risk management of all BCMs.  Accordingly, risk management functions, presently performed by PSX for BCMs shall be transferred to the NCCPL  The SECP has directed NCCPL and PSX to complete certain tasks with respect to transfer of risk management to NCCPL. Overview

5. Following Risk Management Components shall be transferred from PSX to NCCPL: EXPOSURE MARGINS & MTM LOSSES MANAGEMENT CLIENT LEVEL MARGINING REGIME MONITORING & MAINTENANCE OF CAPITAL ADEQUACY REQUIREMENT MONITORING OF POSITION LIMITS COLLETERAL MANAGEMENT Risk Management Components

6.  Present risk management system of PSX has become operational from NCCPL Premises effective from Monday, April, 11 2016  NCCPL shall implement its own risk management system and effective date of the same will be notified by the NCCPL in due course.  Such Risk Management System shall be operated by the NCCPL and Broker Clearing Members in a same manner as it was implemented by PSX. Risk Management System

7. For smooth transfer and avoid any inconvenience, followings requirements should be fulfilled: 1. Agreements  BCMs are required to execute Tripartite Agreement with NCCPL and their respective settling bank/ banks for cash management system to replace their existing Tripartite Agreement signed with PSX as per the format circulated by NCCPL.  BCMs are required to execute agreement with NCCPL for Risk Management. Such agreement will be provided by NCCPL shortly. Pre-requisite for RMS Takeover

8. For smooth transfer and avoid any inconvenience, followings requirements should be fulfilled: 2. Collateral in terms of Shares  The title of Pledge Account shall be replaced with NCCPL and margin eligible securities pledge/release mechanism will remain the same as applicable for BCM with PSX.  Undertaking of pledging as per schedule VIII of risk management regulations for certain circumstances if Provided to PSX should be provided to NCCPL Pre-requisite for RMS Takeover

9. For smooth transfer and avoid any inconvenience, followings requirements should be fulfilled: 3. Collateral in terms of Bank Guarantee  The bank guarantees currently issued in favor of PSX should be transferred to NCCPL. 4. Collateral in terms of Treasury Bills (T-Bills)  The treasury bills should be transferred to our IPS account from PSX account. 5. Allocation of Net Capital Balance (NCB)  Market-wise allocation of NCB should be provided to NCCPL. Pre-requisite for RMS Takeover

10. For smooth transfer and avoid any inconvenience, followings requirements should be fulfilled: 6. Undertaking to Utilize Excess Collateral for Clients  Said undertaking as provided by BCM should also be provided to NCCPL 7. Undertaking of Authorization for Pledge  Said undertaking as provided by BCM should also be provided to NCCPL Pre-requisite for RMS Takeover

11. Thank you Thank you ! 11