SECP compiles first-ever rule book for equity market

Document applicable to Lahore and Karachi stock exchanges.

KARACHI: However surprising it may sound, the fact remains that Pakistan’s equity market did not have a single, comprehensive document until now that listed all the rules and regulations governing the securities business in the country.

But the Securities and Exchange Commission (SECP) has now addressed this issue by compiling the entire regulatory framework in a single ‘rule book,’ according to Karachi Stock Exchange (KSE) Managing Director Nadeem Naqvi.

Speaking at a press briefing held in the trading hall of the KSE building on Friday, Naqvi said the rule book is equally applicable to Lahore and Karachi stock exchanges as well.



Flanked by the officials of the KSE’s regulatory affairs department – which reports directly to the board of directors in order to ensure its independence from the exchange’s commercial operations – Naqvi spoke at length about the soundness of the country’s equity market.

“The benchmark index has risen 15.8% since the beginning of 2014. Many people are worried that it may represent a bubble. But I believe the market is up because of genuine interest from foreign and local investors,” he said.

Saying that market capitalisation as a percentage of the country’s gross domestic product is still 30% compared to 47% witnessed in the run-up to the 2008 financial meltdown; Naqvi said the market is far from overbought.

“Both official and unofficial leverage in 2008 amounted to Rs80 billion. As of today, unofficial leverage is negligible while the official figure is roughly Rs10 billion,” he noted while highlighting the inherent strength of the Karachi stock market.

Referring to the foreign institutional portfolio investment of $86 million in the first 100 days of the calendar year, he said people should look at the market’s fundamentals closely before casting doubts on its soundness. “The return on equity on non-finance companies is about 20%, which is one of the highest in Asia,” he added.

With regard to market discipline and the KSE’s role as the frontline equity regulator, Naqvi said it has suspended or taken other actions against as many as 14 members of the stock exchange since 2008.

Published in The Express Tribune, April 12^th, 2014.

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