Capital Market Development Program (CMDP), which was initiated a couple of years ago by the Government of Pakistan in collaboration with Asian Development Bank (ADB), to strengthen regulatory and institutional framework, eliminate market distortions, modernize and upgrade securities market made further progress during the year, as ADB released the final tranche of US$125 million this year. Also, Securities and Exchange Commission of Pakistan (SECP), after attaining autonomous status, has assumed a proactive role in strengthening the regulatory framework in three stock exchanges. During the FY00, SECP took many steps to enhance the efficiency of the market. These are:

The Companies (Buy-back of Shares) Rules, 1999
The companies were prohibited from buying back their own shares under section 95 of the companies Ordinance, 1984. The proposal for allowing companies to buy back their own shares (treasury stock) has remained under consideration of the Government for a long time. Market participants have been consistently emphasizing the fact that the proposed measure would contribute towards stabilizing the market as some companies having excess liquidity would be able to purchase their shares from the market, if according to their perception, these were under-priced, as number of companies were being quoted in the market at prices much below their break up value. The proposed measure was considered at different forums in the context of neutralizing turbulence in the stock markets and there had been consensus that companies should be allowed to buy-back their own shares subject to effective safeguards against possibility of manipulation of share prices. These rules came in to effect on 14th December 1999.

The Companies (Asset-backed Securitization) Rules, 1999
Securitization is the process of using financial assets of banks, leasing companies, utilities and corporates etc. to issue securities. Assets that can be securitized include mortgage loans, auto loans, leases, utility payment etc. In ideal circumstances, asset securitization confers certain advantages on the originator or the company whose assets get securitized. Securitization is an emerging funding option for NBFI's, especially in the current state of the financial markets. Its relevance has increased, given the squeeze in the traditional funding sources like banks, institutional finance and fixed deposits and enhanced focus of investors on the asset quality of a finance company. Securitization results in an asset backed tradable debt instrument, with the asset quality being closely scrutinized and monitored by a rating agency, while credit enhancement is built in to take care of possible defaults. The entire structure provides added comfort to the investor. Securitization can be used effectively by corporate in the financing business to improve spreads. In the most commonly used method, the corporate may sell a part of its assets portfolio to a Special Purpose Vehicle (SPV), thereby realizing today the stream of cash inflows which these assets would have fetched in the future. The SPV simultaneously raises debt on the strength of cash flows and the underlying assets, using the proceeds to pay off the corporate. The transaction is inevitably rated by a rating agency, which provides the necessary safeguard for the investors in the debt-market. SECP notified on 14th December 1999, the legal framework for securitization of assets, which were recommended by a committee of legal and financial experts. The legal framework for securitization has been provided through the Companies (Asset-Backed) Securitization Rules, 1999 to facilitate the process. By introduction of this concept, Pakistan has entered an era where financial markets could reap the advantages of this mode from which the developed markets have benefited to a great extent.