New trading system fiasco at PSX

Existing mechanism poses risks to the integrity, reliability of the financial market

KARACHI:

The recent vacillation at the Pakistan Stock Exchange following the hastened launch and the eventual withdrawal of the long-awaited trading system created a huge buzz on both mainstream and social media globally. The existing Karachi Automated Trading System, or simply known as KATS, has long been declared outdated and reportedly contains many loopholes and security lacunas that pose a serious risk to the integrity and reliability of the financial market of the country. The widespread rumours about the data leaks and lack of stringent surveillance capability are some serious issues that cannot be ignored for long.

It was not just introduction of a new system with unresolved issues but also the timing of the launch which created a negative vibe in the market. The timing coincided with the rollover week and also placed a dampener on the anticipated bull run following the successful trip of Prime Minister Imran Khan to Saudi Arabia and a political settlement between the government and the Tehreek-e-Labbaik Pakistan (TLP). Although PSX CEO has stated that the new system was launched in close coordination with all the stakeholders including brokers however, AKD Securities Head of Online Trading Haris Aslam was surprised that despite constant reports of unresolved issues, the system was launched without proper backup plan. He believes that the new system is capable of delivering but at the same time, he suggested forming a steering committee comprising IT experts and brokers to sort out all the issues on a priority basis before the system’s re-launch.

According to the official statement by the PSX, the main issues were related to the locally developed front-end interface Jade Trading Terminal (JTT) and the main trading platform from Shenzhen Stock Exchange met all the expectations. The SCS Head of Strategy Faisal Shaji strongly suggested the PSX management to engage with the best local vendor to create a seamless interface for the new trading system to ensure its optimum utilisation instead of creating a bottleneck.

The existing KATS system is as old as many young traders flocking to the market these days thanks to the growing number of self-proclaimed market gurus on social media and Whatsapp groups. As most of these young traders are tech-savvy, they occasionally complain about the existing system which lacks many features that are considered essential such as the ability to put a trailing stop loss. Also, the lack of features coupled with constant issues on both mobile and desktop trading apps makes them wonder what age they are living in, especially when they look around in other emerging or even frontier markets.

According to a recent report from the National Clearing Company of Pakistan Limited (NCCPL), the active registered unique identification numbers (UINs) stood at 264,525 till October 2021. Around 30,000 new UINs have been added since February this year and many of them belong to overseas Pakistani investors who opened their accounts through the Roshan Digital Account (RDA) initiative. While these overseas investors may be new to the Pakistani stock market, many of them possess ample exposure in the international markets and they are fully aware of the international best practices.

These overseas Pakistan have excess liquidity which can easily fill the void created by the constant exodus of foreign investors from our markets. If the PSX management wants to keep them engaged and increase their participation further, it has to provide these well-versed investors the infrastructure and resources to at least match if not exceed the global benchmarks.

The writer is a financial market enthusiast and is attached to Pakistan’s stocks, commodities and emerging technology

 

Published in The Express Tribune, November 8^th, 2021.

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