SECP softens rules to increase volumes, liquidity at PSX

Doubles the number of securities eligible for financing under the Margin Trading System

KARACHI: Pakistan Stock Exchange (PSX) lost its glory during the outgoing year 2017.

Its stakeholders - regulators, stockbrokers, dealers and traders - are making frantic efforts to remake the market. In its latest move, the apex regulator has softened regulations in an attempt to help increase trade activities and provide more liquidity for the market.



The Securities and Exchange Commission of Pakistan (SECP) has increased the credit limit for traders by doubling the number of securities that can be traded under the available leverage product - Margin Trading System (MTS).

Thus far, the traders were allowed to buy 28 securities on credit under the MTS. However, “amendments in MTS regulations have made another 27-28 securities available for purchase on credit,” National Clearing Company of Pakistan Limited (NCCPL) CEO Muhammad Lukman told The Express Tribune.

NCCPL has yet to notify the list of additional securities for the MTS. For the purpose, it would analyse year-end (December 29) data of the PSX to identify the eligible securities and announce their names in the first week of January 2018. “The additional securities will also come from the (PSX benchmark) KSE-100 Index. Traders will be able to take positions against the available credit limit in those additional securities from February 1, 2018,” Lukman added.

The KSE-100 Index has recovered a little bit in the last couple of sessions to 39,525.75 points at the end of trading on Tuesday. However, it is still 17% down since the start of 2017 and 25% from its peak of 52,876.46 points hit on May 24, 2017.

The NCCPL CEO added there were two types of regulations - one deals with selection criteria while the other is about risk management.



The selection criteria have been made slightly lenient to allow more securities to become eligible for the MTS and make available more liquidity in the market which would help in enhancing trading activities.

However, the regulations dealing with risk management for the additional securities have been made more stringent as they will have lesser liquidity than the ones already available in the system.

Published in The Express Tribune, December 27^h, 2017.

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