And even though Pakistan has moved much faster than India in pushing for dematerialised trading, both the countries have adopted almost the same route in pushing paper out from the capital markets.

The issues were the same in both the countries. Ills of fake, forged and stolen shares were well pronounced. Both the countries woke up to the need for a depository around the same time. India had its depository in end-1996, Pakistan had its in September, 1997. The depositories Acts in both the countries gave the shareholder the right to hold paperless shares.

Pakistan, however, broke through this stumbling block much faster than India did. It realised that while the Act gave the shareholder the right to hold physical paper it did not give him the right to trade in demat shares.

Fortunately for the depository in Pakistan, it waspromoted by all the three stock exchanges, Karachi, Lahore and Islamabad, with the former being the main promoter. The exchanges were quick to realise the potential of trading in demat shares something their Indian counterparts have still not understood.

The depository was then given full powers to come out with a time table for pushing securities into the demat mode. The country's largest company, Pakistan Telecommunications, which has an equity base comprising 5.2 billion shares was targeted first. The custodians were asked to verify the shares. Then a period of four weeks were given to all the shareholders after which they could trade only in demat shares.

The Financial Express spoke to two top officials of Pakistan's depository currently in India to attend the Asia-Pacific Central Securities Depository Group meeting, who recounted the astounding success of the depository movement in their country.

"Initially, we thought there would be tremendous opposition but sooner than we expected, themarket was rushing to the depository system", says Najam Ali, chief executive officer of the Central Depository Company of Pakistan Ltd.

Adds, chairman of the depository and the Karachi Stock Exchange, Muhammad Yasin Lakhani: "Today 175 companies out of the 750-odd companies listed at the exchange are in the mandatory demat trading mode. These are all the big boys and account for more than 85 per cent of the total market cap of the companies listed at the bourse. By June 30, 1999 all our companies would be in the demat mode of trading".

"The turnover of the exchange has risen by almost five times post-demat trading owing to quicker settlement procedures. A number of illiquid scrips have turned liquid", he says.

"We had in fact hired the services of the same person who had advised the Indian depository. In our case, however, it is the exchanges and the depository who have pushed for scripless trading as SROs and not the securities regulator", says Ali.

"We too were anticipating trouble from some vestedinterests but we were prepared to take the risk considering the increasing amount of hardships investors were facing through the ills of paper-based transactions", says Lakhani.

India is now following the same model of announcing a list of companies where investors would be allowed to trade only in demat shares. As of now 31 scrips have been put on the list by the Securities and Exchange Board of India (Sebi).

In India, however, exchanges have not been able to come together in jointly getting rid of paper and that is the reason why Sebi has had to step in to dabble in matters which should otherwise have been easily tackled by the exchanges themselves considering that trading is a function of the stock exchange.

Interestingly, Ali had never come to India before and it is Lakhani's second trip to this country. "There is definitely a need for greater interaction between the market institutions of the two countries. We should hopefully in the future see Indian stocks being listed on Pakistani bourses andvice-versa. Our only message to the Indian regulator and the depository is that we have made a start by visiting India and we hope that they will reciprocate by coming and seeing the way our institutions function", says Lakhani.