SECP chief, stockbrokers discuss extensive reforms

Deliberations aimed at relaxing regulations to revive plunging market

KARACHI: Pakistan’s stock market has regained about 5.75% of its value and settled well above 30,000 points in the past two days.

Experts say value buying at five-year low levels put the oversold market on an uptrend. An industry official, however, has linked the smart recovery to market talk that the apex regulator was going to soften some regulations.

Newly appointed Securities and Exchange Commission of Pakistan (SECP) Chairman Aamir Khan is currently on a three-day visit to Karachi beginning Monday. He, along with other high officials of the SECP, held a number of meetings with stakeholders of the Pakistan Stock Exchange (PSX) in the past two days.

The stakeholders included PSX stockbrokers, representatives of the State Bank of Pakistan and the National Clearing Company of Pakistan Limited (NCCPL) and others.

“The objective of the meetings is to extensively discuss reforms at the PSX in consultation with all the stakeholders,” SECP spokesperson Musarat Jabeen told The Express Tribune on Tuesday.

The industry official added that the SECP team held parleys in an attempt to relax a number of regulations to revive the plunging market after the government encountered hurdles in the way of launching a market support fund worth Rs20 billion.

“The proposals coming up for discussion (in meetings) are aimed at supporting long-term growth and vibrancy of the capital market, managing systemic risks and ensuring market transparency,” he said.

Meeting participants reviewed the value at risk (VAR)-based margin regime, in particular the additional margins imposed over and above the VAR-based exposure margins and liquidity margins in the ready market.

They considered the uptick rule for blank sales in the deliverable futures market, removal of practical difficulties concerning the use of F8 window and allowing mutual funds to partially avail the borrowing limit currently allowed for redemption, only for investing in the market.

“In addition to these, the SECP team in Islamabad is closely monitoring the market situation and deliberating on reforms for enhancing liquidity and removing practical difficulties,” the industry official said.

“The SECP will relax the regulations after making sure that the risk management system remains unharmed.”

PSX Stockbrokers Association former general secretary Adil Ghaffar, who attended one of the meetings, raised the issue of base minimum capital.

“Its maintenance is one of the major hurdles to the brokerage business,” he said, adding that the SECP had assured to do away with overregulation where it felt necessary.

He said the SECP officials were considering ending blank selling at the PSX as a measure to revive the market. They, however, were later convinced that the move would send a negative signal to foreign investors and agreed to continue to permit blank selling.

The PSX benchmark KSE-100 index gained over 1,650 points, or 5.75%, in the past two days to stand at 30,419 points on Tuesday. In the prior eight consecutive sessions, the index had lost over 3,000 points, or around 10%, to a five-year low at 28,765 points by Friday last week.

Published in The Express Tribune, August 21^st, 2019.

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