INTRODUCTION

Incorporated as a public limited (Unlisted) company in 1993, Central Depository

Company of Pakistan Limited (CDC) is the only depository in Pakistan. The
Company started operations in September 1997. CDC is the sole entity handling the
electronic (paperless) settlement of transactions carried out at all three stock
exchanges of the country. Through efficient functioning of CDC, approximately
99% of the market settlement is in book entry form.
CDC was primarily established to operate the Central Depository System (CDS) for
equity, debt and other financial instruments that are traded in the Pakistani Capital
Market. However, with the passage of time and development of Pakistan’s Capital
Market, it now also provides services that are beyond the traditional depository
services. CDS is an electronic book entry system used to record and maintain
securities and their transfer’s registration. The system changes the ownership of
securities without any physical movement or endorsement of certificates and
execution of transfer instruments.
CDC provides depository services to a wide range of Capital Market participants
which includes Brokers, Asset Management Companies, Banks (including Custodian
Banks) and general retail investors. It also serves to link up the Issuers and
Registrars of securities and the market for the purpose of executing corporate actions
like disbursement of corporate benefits and carrying out mergers and splits.
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 regulated by the Securities and
Exchange Commission of Pakistan (SECP). CDC has branches in Karachi, Lahore,
Islamabad and Hyderabad.
Taking another step towards capital market development, CDC has diversified its
operations in the following services:
• Launched in 1999, Investor Account Services (IAS) allows retail investors to
open and maintain securities’ accounts directly with CDC.
• Trustee and Custodial Services (T&C) were introduced in 2002 and enlists
Open-end and Closed end Mutual Funds and Voluntary Pension Schemes.

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 • Launched in 2008, Share Registrar Services (SRS) provides issuing
companies state-of-the-art facilities of registrar and transfer agent services,
including registration and verification of shares and records and customer
dealing on behalf of issuer companies
HISTORY

With an ever increasing exponential growth in the Pakistani Capital Market during
the last decade causing a huge increase in trading volumes, the physical handling of
paper-based shares/ 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 and eliminates the tedious process
of physical shares handling and transfer.
Experts from PriceWaterhouseCoopers 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 for depository design.
In November 1994, the Board of Directors at 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 laws
• Regulations & Procedures
• Financial and organizational aspects of the project
In April 1995, MIP was approved by the CDC board.
The infrastructural development included development and testing 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 neutral depository.

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VISION
To be a leading national institution providing quality services to capital &
financial markets stimulating economic growth.
MISSION

CDC is committed to provide secured & dependable services to the

capital & financial markets in an efficient & 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 & best talent in
the country while maintaining good corporate governance in its working. It
is committed to provide its employees an environment of professional &
personal growth.
ORGANIZATIONAL STRUCTURE
The operations of the company are carried out by a team of highly talented and
experienced professionals belonging to a wide spectrum of relevant disciplines with
graduate and postgraduate qualifications from distinguished local and foreign
institutions. Based on operational needs, the company has segregated itself in the
following departments:

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CORE BUSINESSES AND PRODUCTS

1. CENTRAL DEPOSITORY SYSTEM

The main function of CDC is to operate and maintain the Central Depository System
(CDS), drawing guidance from a well-defined legal framework laid down by
Securities & Exchange Commission of Pakistan (SECP). Installed by an IBM-led
consortium, CDS is an electronic book-entry system used to record and maintain
securities and to register the transfer of securities.
The system changes the ownership of securities without any physical movement or
endorsement of certificates and execution of transfer instruments. CDS facilitates
equity, debt and other financial instruments in the Pakistani Capital Market. It
manages Ordinary & Preference shares, TFCs, WAPDA Bonds, Sukuk, Open-End &
Closed-End funds and Modaraba Certificates.
BENEFITS OF ELECTRONIC SETTLEMENT THROUGH CDS.
Following are some of the benefits of electronic settlement of securities through
CDS:
• Reduced workload and manpower requirements due to paperless settlement.
• Instantaneous transfer of ownership.
• No stamp duty on transfers in CDS.
• No risk of damaged, lost, forged or duplicate certificates.
• No impact in case of sudden increase of settlement volumes.
• Instant credit of corporate entitlements (bonus, rights and new issues).
• Paperless environment (no traditional vaults).
• Secure custody of securities.
• Substantial reduction of paperwork during book closure.
• Convenient pledging of securities.
• Substantial reduction in time & capital investments.
TRANSACTIONS HANDLED BY CDS

• Deposit of Securities
• Transfer of Securities
• Pledging of Securities
• Pledge Release
• Pledge Call

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 • Withdrawal of Securities
2. INVESTOR ACCOUNT SERVICES
Investor Account Services offered by Central Depository Company allows retail
investors to directly open and maintain accounts in Central Depository System for
electronic settlement of securities. Earlier, to settle the securities through Central
Depository System, investors had to open client accounts (sub accounts) with the
CDS Participants (brokers & financial institutions). With Investor Account Services,
investors can now have direct access to their account.
Investor Account, like sub account, is an electronic account in which investors can
keep their book entry securities. Investor Accounts are under complete control of
CDC and are operated on direct written instruction of the Investor Account Holders.
Sub Accounts, on the other hand, are maintained and operated by CDC Participants
(third party) on behalf of the sub account holders. In short, CDC directly controls
Investor Accounts whereas sub accounts are controlled by CDC Participants.
Keeping Investor-Convenience at the foremost of our priorities, CDC has launched
CDC Access- Web & IVR services. Now your investor account will be even more
accessible, and your account information will be at your finger tips round the clock,
24/7 – 365 days a year.
In the light of above from January 2007, the investor account holders will receive the
Account Balance Statements as of the end of each quarter i.e. as on March, June,
September and December.”
BENEFITS OF INVESTOR ACCOUNT SERVICES (IAS)
SECURITY
Secured custody of securities has always been a prime concern of investors in
Pakistani capital market. This factor has been a major hindrance in establishing
confidence of investors in the securities market. The need for direct access was
greatly felt among investors after the introduction of CDS. By opening investor
accounts with CDC, investors no longer have to worry about the custody of their
securities because:

• Investors now have direct access to their securities, which are maintained by
CDC in accounts operated directly and only on the instructions of investors.
• CDC is regulated by the Securities & Exchange Commission of Pakistan.
The relevant legislations are Companies Ordinance 1984, Central
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 Depositories Act 1997 and Central Depository Company of Pakistan Limited
Regulations.

CONTROL
After the dematerialization of security certificates, investors no longer have physical
possession of securities and are troubled by the lack of control over their securities.
By opening Investor Accounts with CDC, investors are able to directly control their
electronic securities. Although trading is still done through brokers, settlement is
done through CDS on written instructions from investors.

3. TRUSTEE AND CUSTODIAL SERVICES

In 2002, the mutual fund industry started flourishing in the Pakistani Capital Market
and provided a new concept and investment arena to retail and individual investors
who possess inadequate knowledge of the capital market but are interested in
utilizing its benefits.

Central Depository Company, realizing the importance and service demands of this
sector started Trustee & Custodial Services in 2002, initially with two open-ended
mutual funds with net assets value of Rs. 500 million. The Company, through its
proactive approach and high standards of service, has become the market leader in
the private sector and currently provides Trustee & Custodial Services to 88 mutual
funds managed by various Asset Management Companies (AMCs)/Pension Fund
Managers (PFMs) with an aggregate fund size of approximately Rs. 117 billion.
Since the start of this operation, the CDC Trustee and Custodial Services has become
the preferred choice due to its excellent service level and the level of business
understanding possessed by their staff.
NATURE OF SERVICES
The prime responsibility of CDC as the trustee/custodian is to take into its custody
all the assets of the Collective Investment Scheme and hold them in trust on behalf
of the unit or certificate holders. Additionally, CDC carries out the instructions of
the asset management company/investment adviser/pension fund managers in
respect of the investment portfolio and the units/certificates held by the investors,
while ensuring that, in all material respects, the scheme is being managed in

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accordance with the provisions of the constitutive documents, the NBFC Rules, the
Regulations and VPS Rules.
INFRASTRUCTURE

• IT SYSTEM & BACK-UP SUPPORT

Central Depository Company (CDC) is acknowledged as a model IT-based company

with the finest of IT professionals in the field of system development and
maintenance and state-of-the-art IT infrastructure. In order to further enhance the
quality and efficiency of our Trustee services, our in house software development
team has developed and a Fund Management System (FMS) specifically for the
activities of Trustee/Custodian business.

• FUND MANAGEMENT SYSTEM (FMS)

Through FMS, the company intends to implement straight-through-processing

(STP), which enables the ultimate possible automation of all the financial
transactions directly from AMC to Bank via CDC.
The objective of this effort is to streamline the process, eventually eliminating the
need for intervention in the settlement cycle. This in turn should reduce risk and
uncertainty as well as the level of customer securities and funding required for
completing settlement for a given volume of trade.
The system is expected to enormously increase the efficiency and reliability of
trustee and custodial operations. Further, the need for manual processing will be
reduced to a large extent. The system is expected to enormously increase the
efficiency and reliability of trustee and custodial operations. Further, the need for
manual processing will be reduced to a large extent. The system has enabled CDC to
perform the following functions, among others, more effectively:
 Maintenance of investment portfolio.
 Ensuring compliance with the governing rules and regulations.
 Recording and maintenance of the details of Unit Holder transactions.
 Generation of different reports.
4. SHARE REGISTRATION SERVICE
CDC offers Shares Registrar Services (also known as Transfer Agent or R/TA
services) to facilitate Issuers and their shareholders. This initiative was taken in early

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2008 to cater to the growing need of more comprehensive and efficient SRS services
in the Pakistani Capital Market.
SRS is one of the most important services required by a capital market in any
country or region. Considering the current market scenario where none of the other
SRS service offerings are composite enough to offer a one-stop solution, CDC has
developed a high-tech Share Accounting System with an exclusive Authority &
Security Management System and workflow components to guarantee efficient SRS
services. CDC - SRS offers a composite portfolio of maintenance, registration,
verification and direct customer dealing & interaction.
CDC has taken a competitive lead in the market for SRS services by providing a
one-window solution to shareholders, backed by a country-wide branch network and
state-of-the-art IT infrastructure. Also, independent Legal and Internal Audit
departments ensure statutory and regulatory compliances. Additionally, the feature
that gives CDC a real edge is its Business Continuity Program (BCP) supported by
backup sites and disaster recovery capabilities to ensure integrity of information and
recovery of the service immediately in case of any disaster.
Currently, CDC – SRS is the most comprehensive and efficient Shares Registrar /
Transfer Agent Services in the market. By providing a synergy between depository
and shares registrar services and through a combination of state-of-the-art service
features, CDC has raised the bar of service excellence in the financial services
industry.
SCOPE OF SERVICE
Following is the scope of services that would be provided under the umbrella of
CDC – SRS Services.
• Maintenance of computerized Members’ Register
• Maintenance of specimen signatures of share holders
• Dealing with share holders on SRS Service Counter, telephone and through
mail.
• Verification of share holders’ signatures on Transfer Deeds and Proxy Forms
etc.
• Physical Transfer of Securities, Deposit of Securities into CDS, Withdrawal
of Securities from CDS and transmission of physical certificates / Securities.

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 • Issuance of duplicate certificates and dividend warrants against appropriate
indemnities and fulfillment of formalities
• Split / Consolidation / Renewal of certificates
• Dividend Entitlements and Payments to share holders
• Bonus Shares issuance to share holders with fractional shares payment
• Custody of undelivered certificates and dividend warrants, etc.
• Preparation of reports related to the securities and share holders

INTERNATIONAL COMPARISON
The depository trust and clearing corporation, DTCC, has helped automate,
centralize, standardize and streamline processes that are critical to the safety and
soundness of the capital markets in US.
Some of the main services provided by DTCC include
• GLOBAL TAX SERVICES
Global Tax Services offers a variety of services for both domestic and
international clients including tax data services, withholding services and tax
relief for DTC customers and their clients, U.S. withholding tax services for
non-U.S. institutions, and a year-end tax information reporting and data
services.
• INSURANCE AND RETIREMENT SERVICES
Insurance & Retirement Services offers a suite of streamlined processing and
compliance-driven solutions for carriers and their distribution partners
through a secure, centralized infrastructure. These services are provided by
National Securities Clearing Corporation, a subsidiary of DTCC.
• UNDERWRITING SERVICES
Through the service's New Issue Eligibility program, underwriters can
distribute both primary and secondary offerings of securities quickly and
economically via electronic book-entry delivery and settlement. These newly
issued securities are then available for the full range of depository services.
• WEALTH MANAGEMENT SERVICE
Through automation, standardization and centralization, Mutual Fund
Services have been a catalyst for the dramatic expansion of business
relationships between fund companies — the creators and manufacturers of
fund investments — and the vast network of broker/dealers, banks, trusts and
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 other financial services firms that offer these investments to the institutional
and retail markets.
FUTURE OUTLOOK
CDC is playing a vital role in the development of capital market in Pakistan.
The electronic aspect of CDC is making things easier and more customers
friendly. It has ensured that CDC keeps in pace with changing demands and
requirements in the outer world. Although it is currently providing abundant
of services to its services still there is scope for improvement. Some of the
services that CDC can provide in the future and increase its scope of
operations include
• IPO handling and registrar services to mutual funds
• The database developed here can be provided to FBR for tax purposes
• It can also initiate insurance services
• The clearance services provided to banks by NIFT can be co shared by the
CDC for inter city clearing, thus making the clearance system more efficient.