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A contract which allows buying or selling of eligible underlying shares at a certain date in the future, at futures price i.e., the price at which it is bought or sold in the CSF market.
At expiry, profits or losses are settled by crediting or debiting the accounts of contract holders in an amount equal to the difference between the futures price and the final settlement price, multiplied by the contract multiplier.
The final settlement price is determined as the official closing price of the underlying stock quoted by PSX on the last trading day.
To offset an open short stock futures position before expiry, a seller of a stock futures contract simply buys back the contract while a buyer sells a stock futures contract to close the open long position.
CSF Contract is divided into 2 (two) types, namely:
1. Buy Contract (Long): Agreement to buy shares at a certain price and period
“LONG” CSF investors will gain profits if the spot price rises since they have locked in a lower purchase price (matched price) than the market price (spot price).
2. Sell Contract (Short): Agreement to sell shares at a certain price and period.
“SHORT” CSF investors will gain profits if the spot price falls since they have locked in a higher selling price (matched price) than the market price (spot price).
Mode of settlement is cash, where final settlement is the difference between futures price and final settlement price, simplifying the settlement process and avoiding the complexities of physical delivery.
CSF enable traders to benefit from both rising and falling markets. For instance, they can go long by purchasing CSF at a lower price in anticipation of a stock’s upward movement, or take a short position by selling CSF first and repurchasing later when expecting a decline in the underlying stock price, without the necessity of borrowing the underlying shares.
Investors can mitigate portfolio risk by taking opposite positions in CSF market. For instance, those holding a stock may hedge against a possible price drop by shorting the CSF on the same stock, or vice versa.
Because the margin needed to hold a stock futures position represents only a fraction of the future contract’s value, investors can engage in hedging or trading with a reduced capital requirement.
At PSX, certain symbols are not available under DFC contracts; however, they qualify as CSF-eligible. As a result, derivative exposure to these symbols can be achieved through CSF contracts.
| Features | Description |
|---|---|
| Eligible Stocks | Eligible securities as per approved criteria (reviewed quarterly) |
| Contract Multiplier | 500 shares for standardized contract (unless adjusted for corporate actions in the underlying stock) |
| Listing Date | First trading day following the last Friday of each calendar month |
| Listing Price | Theoretical price based on (i) underlying’s close price (ii) KIBOR (iii) days to maturity and (iv) spread |
| Maturities | Spot month and next two calendar months |
| Symbol |
Stock Ticker-CExpiryMonth (ABC-CDEC)
– for standardized contracts Stock Ticker-CExpiryMonthN1 (ABC-CDECN1) – for non-standardized contracts |
| Lot Size | 1 contract |
| Minimum Fluctuation | PKR 0.01 |
| Circuit Breaker | PKR 1 or 10%; whichever is higher |
| Order Types | All order types |
| Daily Settlement Price | VWAP in CSF or the theoretical price (in case of no trade during the day) |
| Expiration Date | Last Friday of the calendar month |
| Final Settlement Price | Underlying’s close price |
| Settlement Method | Cash settlement @ T+1 |
Traders can take advantage of mispricing between cash-settled futures and the deliverable futures contract, profiting from these price differentials
Equity futures are financial contracts in which two parties agree on a predetermined value. Their value is derived from, and directly linked to, the value of the underlying asset.
Equities, DFC, and CSF are distinguished individually:
The contract multiplier specifies the minimum number of underlying equity units involved when a single CSF contract is traded. At PSX, contract multiplier for CSF is 500 shares which means buying or selling one contract is equivalent to transacting 500 shares of the underlying stock.
All types of investors are allowed to trade on DFM Equity futures. Example, all individuals, institutional, funds, corporate clients, etc.
CSF contracts are listed on the first trading day following the last Friday of the calendar month.
It is the last day on which the contracts expire. CSF contracts expire on the last Friday of the expiry month. If the last Friday is a trading holiday, the contracts expire on the previous trading day.
No, only stocks which meet CSF eligibility criteria are available under CSF contracts. Exchange reviews this list quarterly.
09:30 am – 3:30 pm, Monday – Thursday
09:15 am – 4:30 pm, Friday (Namaz break from 12:00
pm till 2:30 pm)
Yes, CSF allows for going into a short position without a long position.
Yes, CSF contract is adjusted to adjust the effect of cash dividend, bonus and/or right announcement in the underlying. The contract multiplier, contract price and free-float are adjusted to ensure exposure remains the same.
No, in CSF there is no concept for force closure where contracts are broken down into A / B and rollover week is provided. Instead, contract multiplier, contract price and free-float are adjusted to ensure no new contract is opened and impact of corporate action (dividend, bonus and/or right) are adjusted into the contract.
On the expiry day of the contract all open positions are expired/closed and positions are settled for the profit and loss using the Final Settlement price on the expiry day, which will be the closing price of the underlying stock.
On the last trading day, the clearing house will automatically close and settle your position at the final settlement price.
These limits are PKR 1 or 10%, whichever is higher.
