SUBJECT: PROHIBITORY ORDER UNDER SECTION 20 OF THE SECURITIES AND EXCHANGE ORDINANCE, 1969
1. WHEREAS, it was observed from the examination of trading data of Karachi Stock Exchange ("KSE") during the period starting from December 01, 2014 to December 22, 2014 ("the Period") that certain individual clients of MI Misbah Securities (Pvt) Limited ("The Brokerage House"), TREC Holder of KSE, have been actively placing orders in various scrips at KSE.
2. WHEREAS, the review of the order level and trade level data indicates that quantum of trades executed by such clients were very in few proportion to the orders placed by them. This lead to a detailed review of the order level data of the clients.
3. WHEREAS, the detailed review of the order level data of the clients of the Brokerage House namely, Muhammad Sharjeel and Muzzamil lnyatullah bearing clients codes 12/3, 9/32 and 9/3, respectively, later referred as the Clients, showed that they placed significant quantum of buy/sell orders in various scrips during the Period and out of which a large proportion was deleted within 10 seconds after the placement of the same. The summary of the statistics is given as below: {{TABLE}} Sr. # Name Client Code Terminal ID Orders Placed Orders Cancelled within 10 seconds %Age of cancelled orders to Total Orders 1 Muhammad Umair AR113 MEM03709 593 397 66.95% 2 Muhammad Ibrahim W587 REM03701 756 200 26.46% 3 Muhammad Asif W546 F1X03701 846 156 18.44% {{TABLE}}
4. WHEREAS, the Securities and Exchange Commission of Pakistan ("Commission") vide letter dated January 13, 2015 inquired the Brokerage House about the rationale of such orders and transactions in question.
In response the Brokerage House informed the Commission that it has communicated the same to its clients and advised them to avoid this type of trading practice.
5. WHEREAS, the practice adopted by the clients of the Brokerage House is in conflict with the fair market practices. wherein the Clients have indulged in a practice of placing large sums of orders with no intention to purchase/sell the same. Please note that such pattern persuades the interest of the general public for trading in these shares and create a false and misleading appearance of active trading in any security.
6. WHEREAS, the Brokerage House is responsible for each and every order placed or trade executed through its trading terminal. Further, merely acknowledging and regretting a mistake does not absolve it from its responsibilities. It is the responsibility of the Brokerage House that it should monitor all the trading activities being executed through its terminal and should keep track and prevent any transaction being made in violation of any applicable rules and regulations.
7. WHEREAS, being an active participant, the Broker should be conscious of the responsibility it is carrying being in the business of the capital markets. It is pertinent to note that orders which were placed by the Clients of the Brokerage House were not placed with the intention of executing fair transaction in the capital markets and the same was overlooked by the Brokerage House.
8. IN VIEW THEREFORE, in exercise of the powers conferred under Section 20 of the Securities and Exchange Ordinance, 1969, ("Ordinance") the Brokerage House is directed to prohibit such trading practices through its terminals, as referred above, which are not in line with the prevalent regulatory framework and constitute or is calculated to constitute contravention of any provision of this Ordinance and rules and regulations made thereunder. The Brokerage House is further directed to comply with the rules and regulations failing which UINs of the said clients may be blocked.
9. This Prohibitory Order is issued without prejudice to any other action that the Commission may initiate in accordance with law on the matters subsequently investigated or otherwise brought to the knowledge of the Commission.