SECP assures brokers of workable solution for PSX

Chairman promises pre-emptive measures for regulating capital markets

KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has assured brokers of making the existing leverage products workable to increase liquidity at the Pakistan Stock Exchange (PSX) and convincing the government to reduce taxes on shares as well.

“The SECP would look at options to make the Margin Financing System (MFS) workable. Options include increasing the number of securities eligible for MFS,” a broker told The Express Tribune after attending a meeting with SECP Chairman Zafar Abdullah and his team at the PSX on Thursday.

Brokers are demanding the SECP to restore the old badla (leverage) system that was least regulated and used to provide ample liquidity for the market about a decade ago.



Earlier in March this year, the SECP had softened rules for Margin Financing System that allowed brokers to acquire financing from commercial banks against their lending to their shares-clients.

The change of rule, among other things, however, failed to increase the level of liquidity to the expected level, meeting’s participants added.

The Benchmark KSE-100 Index dropped 0.80% to 40,566.21 points on Thursday. The index has remained on a downward trajectory since the presentation of an anti-market budget in May. The index has dropped 23.28% to date from an all-time high of 52,876.46 on May 24. The participant quoted Abdullah as saying that SECP would work on all fronts to make the market a better platform for traders and would support the PSX in governmental channels on issues which are out of its ambit and discretionary powers.

He further said that brokers presented the same proposals to revive the weakening market which they had put before Prime Minister Shahid Khaqan Abbsi at the Governor House in Karachi during the beginning of the month.

The proposals included creation of a fund worth Rs20 billion to be injected into the PSX and relaxation of rate of taxes on capital gain tax, bonus shares and brokers, he added.

Forming task force

A press statement from PSX added that SECP Chairman Zafar Abdullah has promised a task force of 2-3 SECP officials for resolving brokers’ issues on a war-footing.



He further said that it is the commission’s desire to place pre-emptive controls which will help in avoiding the need to impose penalties. With regard to non-representation of TREC Holders on the PSX Board, he said that a vibrant Brokers’ Association of TREC holders is needed, which would raise their issues directly with the SECP.

Seasoned broker Arif Habib represented the PSX chairman in the meeting with SECP and enumerated various issues “which are contributing to the decline of the capital market.” Habib emphasised that capital markets’ improvement is in the interest of the government and the overall economy.

On this occasion, PSX Officiating Managing Director You Hang presented various recommendations for market development.

Published in The Express Tribune, November 24^th, 2017.

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