PHOTO: FILE
Stock brokers, which remain the largest driving force behind the market, have a different perspective. They termed over-regulation and appointment of inexperienced officials on the PSX board of directors the root cause that has badly shaken confidence of investors and damaged market performance.
The KSE 100-share Index has plunged over 17% since January 1, 2017 and 25% from its peak of 52,876.46 points hit on May 24, 2017.
A market official said the Securities and Exchange Commission of Pakistan (SECP) had initiated about 11 criminal proceedings against the stock brokers and investors during the outgoing year 2017.
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“These proceedings have badly shaken the stock investors’ confidence and damaged brokers’ image,” he said, adding, “the SECP has made no significant progress in any of the cases in the court.”
“The cases - of which a majority have not been heard so far due to lack of evidence - have painted the image of investors and brokers like criminals,” he said.
A leading broker, Aqeel Karim Dhedhi, has partially held responsible the SECP-nominated directors on the PSX board for the current stock market crisis.
“They (SECP nominees) are inexperienced people. They have kept making frequent changes or made proposals to change the regulations governing the PSX,” he said.
“If someone initiates an inquiry into the PSX crisis, he will come to know the SECP nominee-directors are one of the reasons behind the market’s plunge,” he emphasised in remarks made recently.
They have proposed draconian changes such as separating the highly liquid stock counters from the illiquid counters and separating the debt markets, massive changes to the Know Your Client (KYC) form from time to time, etc. These all are anti-market measures.
Regulators have been upgrading the KYC form since 2014, but it has remained incomplete so far. The latest episode came very recently when they gave only 14 days to the brokers to upgrade the database of hundreds of thousands of clients. This caused panic in the market.
Later, however, the SECP acting chairman intervened and extended the date for upgrading the KYC form till March 2018, the market source added.
At the outset of the calendar year 2017, the market came under pressure when the then SECP chairman Zafar Hijazi issued hundreds of notices to the stock brokers seeking to know their sources of income and investment and such sources of their clients as well.
A dealer commented that the PSX had been demutualised forcibly and now the regulators were reducing the brokers’ role to zero in amending the regulations.
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“Stock brokers are no more part of the regulatory affairs committee. We are the ones who established the PSX, Central Depository Company and National Clearing Company of Pakistan Limited,” he remarked.
He said the brokers had been begging regulators to take measures to stop the leakage of stock-trading data to their competitors. “This has remained a leading cause of the market meltdown from time to time. However, nothing has been done literally.”
Brokers said the market had been facing massive selling pressure due to the absence of confidence in investors. Otherwise, stock fundamentals are largely intact.
Published in The Express Tribune, December 26h, 2017.
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