KARACHI, Dec 23: In an eventful day on Tuesday, as many as 18 stock brokers were ‘suspended’ for non-payment of mark-to-market losses on their CFS-MK II (badla) positions.

Knowledgeable sources affirmed that they included two directors on the KSE Board and three stock market listed brokerage houses. The beleaguered directors were believed to have submitted their resignations to the chairman of the KSE Board.

While the apex regulator seems to have decided to keep itself out of the job of regulating and the government watching the market slide into a dark crevice, the National Clearing Company of Pakistan (NCCPL), the managers of the CFS market, also kept itself very quiet, leaving the investors to fend for themselves to gather information from various sources.

Informed people said that the 21 brokers still held open positions of around Rs4 billion in the CFS market.

Earlier at 11:00am on Tuesday, the NCCPL issued notices to brokers in as huge number as 53 for non-payment of mark-to-market losses on their CFS. The ‘buy’ sides of their trading terminals were closed.

Those included 10 members operating in the Lahore Stock Exchange. More than half of those paid up sum of Rs900 million. “The remaining are required to settle Rs1.9 billion by 11:00am on Wednesday,” says a stock broker, who thanked his stars for having got out of the harm’s way, in time.

In case the ‘suspended’ brokers or some of them are unable to pay up on Wednesday, they would be given another day to arrange funds and settle dues by Thursday.

Market participants were aware of some already scrambling to gather the required cash, but they looked at about a dozen brokers, who could be sliding into ‘default’.

“In the event that the suspended brokers are unable to show up the required money in two days, they would be declared ‘defaulters’” says a market maker. He said that law would then take its own course, which would include the sale of the shares in their portfolio at discount and if that and other sources could not make up for the overdue amount, the membership cards would be put to auction.

Veterans recall that over the years, countless tales of rags to riches are told at the Karachi Stock Exchange of investors, who made big fortunes. But now may be time to see many such stories going sour.

The 200-member strong broker fraternity prided itself on the galloping value of the membership card. From just around Rs0.5 million in the early 1990s, the broker card had climbed to the staggering price of Rs160 million by the time the stock market touched its peak in August this year.

But the value began to descend in concert with the plunge in stock prices. The last auctioned card had fetched as little as Rs55 million.

“Where will the value be if a dozen or more cards were put up together on the auction block?”, says the broker who got out of the harm’s way in a falling market, but pulls up a long face at looking at the loss of gloss of his card.

The CFS market which stood with unsettled amount of Rs11 billion during the days of the market floor was dragging the borrowers to the bottom of the pit.

Ask any market guru and he is likely to shrug his shoulders, on what has taken the regulators to shift from CFS to margin financing. Aren’t the off-market-transactions currently taking place at around 40 to 50 per cent discount, setting a benchmark for the stock prices in the ready market and should that be allowed now that the floor has been removed?

And what was all that hopeless talk of stock market funds and ‘put options’ that held the market hostage for four months. Was it deliberate to keep investors hanging between hope and despair, by switching statements of funds arriving and not arriving?

No one could tell, which way the events would move on the bourse in the coming days and if more suspensions and defaults were in the making. But most participants and investors were sure that if and when the dust settles, the regulator would have to wake up from the deep slumber and answer many unpleasant questions.