ABOUT CDC :::::::::::::
Central Depository Company of Pakistan Limited
(CDC) was incorporated in 1993 to manage and operate the Central
Depository System (CDS). CDS is an electronic book entry system to
record and transfer securities. Electronic book entry means that the
securities do not physically change hands and the transfer from one
client account to another takes place electronically. An IBM led
consortium along with the management of the company implemented CDS
The aim of CDC is to operate as a central
securities depository on behalf of the financial services industry
so as to contribute to the country's ability to support an effective
capital market system which will attract institutional and retail
level investors from Pakistan and abroad.
CDC is committed to provide secured and
dependable services to the capital and financial markets in an
efficient and cost-effective manner comparable to best international
practices. The Company’s aim is to be the centre of excellence by
continuously employing the state-of-the-art technology available and
best talent in the country while maintaining good corporate
governance in its working. It is committed to provide its employees
an environment of professional and personal growth.
History of CDS Project
With exponential growth in the Pakistani Capital
Market during the last decade resulting in manifold increase in
trading volumes, the physical handling of paper certificates not
only became laborious but also time consuming. The manual system was
no longer feasible. It was in this perspective that CDC was
incorporated to implement and operate the CDS.
Experts of the renowned international firm Price
Waterhouse conducted a study in 1993 to develop a conceptual
framework for the depository. The study was sponsored by the United
States Agency for International Development (USAID) and their report
laid the foundation of depository design.
In November 1994, the Board of CDC awarded a
turnkey contract to the IBM consortium for the implementation of the
system in Pakistan. The IBM consortium proposed a comprehensive
Master Implementation Plan (MIP) to the CDC board after a detailed
analysis of the following:
• National requirements
• Company and Banking
• Regulations & Procedures
• Financial and
organizational aspects of the project
In April 1995, MIP was approved by the CDC
Thereafter, user groups performed, training
sessions were conducted to introduce the system to the clients and
the necessary infrastructure was developed. The infrastructural
development included testing and development of software, hiring and
training of personnel and establishment of CDC offices. The CDC
offices at Lahore and Islamabad were connected to the head office
through VSAT link leading to the development of a geographically
Problems Faced by the Capital Markets
Since the last decade, the capital markets of
Pakistan have witnessed a substantial growth leading to a manifold
increase in the trading volume. The custody and safe keeping of
physical certificates required maintenance of huge vaults by the
individuals and institutions and the physical settlement of
certificates was no longer feasible. Moreover, the manual system was
also plagued by lengthy delays, risks of damage, forgeries and
considerable time and capital investment.
Following is a list of the major problems faced
by the Members of the Stock Exchange, Investors, Issuers of
Securities and others are as follows:
a) Increased volume of book keeping and paper
b) Problems in settlement due to increased volume.
Maintenance of huge vaults for safe keeping of certificates.
Long and cumbersome share transfer procedure taking up to 45 days.
e) Payment of stamp duty on share transfers which ranged from
0.1% to 1.5% of the face value.
f) In case of new issues the
issuers would take more than two months for the dispatch of
to the successful applicants and for the subsequent
preparation and verification of transfer deeds.
g) Risks of
damaged, lost, forged and duplicate certificates.
h) Lengthy and
tedious procedure involved in pledging of physical securities.
Capital and time investment required for issue and dispatch of share
certificates, cash dividend, bonus and right issues.
of duplicate certificates.
k) Activities carried out for share
transfer during book closure:
• Signature verification
Checking correct value of transfer stamps
• Verifying genuineness
• Signature of Director for confirmation of
The answer to all these questions was to set up
an electronic book entry system in Pakistan. This led to the
establishment of Central Depository Company of Pakistan Limited
developed to manage and operate the Central Depository System
Benefits of Electronic Settlement through
Following are some of the benefits of electronic settlement
of securities through CDS:
a) Reduced workload due to paperless settlement.
Reduced manpower and requirements.
c) Instantaneous transfer of
d) No stamp duty on transfers in CDS.
e) No risk
of damaged, lost, forged or duplicate certificates.
f) No impact
in case of sudden increase of settlement volumes.
credit of bonus, rights and new issues.
h) Substantial reduction
of paperwork during book closure.
i) Convenient pledging of
j) Substantial reduction in time & capital