PMEX to transform commodity trade

Exchange pushes warehouse receipt system to help farmers avoid distress sales

KARACHI:

Pakistan Mercantile Exchange (PMEX), the country's only regulated commodity futures exchange, is positioning itself as more than a platform for investors to trade gold, currencies and other commodities. The exchange has the potential to transform fragmented physical markets into organised and efficient systems that support production, consumption, investment and economic growth while reducing risks across key sectors of the economy.

"The exchange's growing footprint comes at a time when Pakistan is searching for ways to modernise agricultural and other commodity supply chains, improve market transparency, and expand investment opportunities for a young population increasingly drawn to financial markets," said Chief Executive Officer (CEO) of PMEX, Khurram Zafar, in an interview with The Express Tribune.

PMEX recorded total trading volume of Rs9.77 trillion during FY2025-26, averaging Rs32 billion in daily turnover and Rs977 billion per month. Trading activity reached a record Rs177 billion in a single day on October 17, 2025, while monthly turnover crossed Rs1.8 trillion in October, the highest level in the exchange's history.

The exchange has also witnessed a steady increase in investor participation, with total accounts opened reaching 67,585. Gold remained the most traded product during the year, followed by currencies traded through contracts of trade (COTs), silver, indices and platinum.

Despite these milestones, the PMEX CEO argues that the exchange's biggest contribution may ultimately come from solving long-standing inefficiencies in Pakistan's commodity markets.

"Commodity exchanges are not merely trading venues. Their real value lies in an indirect role of helping organise markets, improving price discovery and reducing uncertainty for all stakeholders," he said.

The agriculture sector offers perhaps the clearest example of that potential. Pakistan's wheat market remains heavily fragmented despite wheat being the country's most important food crop. Farmers are often forced to sell immediately after harvest when prices are at their lowest because they lack access to affordable financing and proper storage facilities. As a result, many growers receive only a small share of the eventual market value of their produce.

Industry estimates suggest Pakistan loses around Rs20 billion annually due to leakage, spoilage and pest-related losses during wheat storage. Governments also incur significant financing costs, around Rs120 billion annually in recent years, to maintain procurement operations and strategic reserves.

The current system frequently creates a paradox where farmers struggle to earn reasonable returns during harvest season while consumers later face higher flour prices as wheat becomes more expensive.

Zafar said PMEX is working with provincial authorities to expand certified warehousing facilities that could support a modern warehouse receipt system. Under the proposed framework, farmers would deposit wheat and other commodities at accredited warehouses and receive electronic warehouse receipts that can be used as collateral for bank financing.

"The system would allow growers to access working capital without being forced into distress sales immediately after harvest," he said. It gives farmers the ability to store their produce and sell when prices are favourable rather than when financial pressures force them to sell.

Such a mechanism could also reduce dependence on informal lenders and middlemen, who often provide financing on the condition that farmers sell their crop back to them at predetermined rates.

Beyond agriculture, a functioning warehouse receipt ecosystem could benefit traders, storage operators, processors and food manufacturers. Flour mills, for example, would gain access to standardised and certified wheat stocks throughout the year rather than relying on fragmented procurement channels. Investors, meanwhile, could provide liquidity to commodity markets through exchange-traded contracts, helping improve price discovery and market efficiency.

This is the model used by major commodity exchanges globally, where futures markets complement physical trade and help producers and consumers manage price volatility.

"The broader economic implications could be significant," said the PMEX CEO. Pakistan's commodity markets remain largely informal, with transactions often taking place without standardisation, transparent pricing or risk management mechanisms. Such inefficiencies increase costs throughout the supply chain and create uncertainty for producers and consumers alike.

A more developed commodity exchange ecosystem could help convert these fragmented markets into organised structures where transparent prices guide production decisions, inventories are professionally managed, and financing becomes more accessible.

The exchange's growth also comes against the backdrop of rising interest among Pakistanis in financial markets. While PMEX operates through approximately 60 to 70 active brokers, many foreign online trading platforms have rapidly expanded their user bases by directly targeting retail investors through aggressive digital marketing campaigns, thanks to broadband-connected mobile phones in the hands of a huge young population.

According to Zafar, his exchange, being a regulated one, faces significantly higher compliance requirements from institutions such as the Securities and Exchange Commission of Pakistan (SECP), the State Bank of Pakistan and other authorities. These regulations increase costs but provide investor protection and market integrity. Unregulated platforms, by contrast, often operate outside Pakistan's regulatory framework while attracting thousands of investors.

The popularity of such platforms demonstrates strong demand for investment products among young Pakistanis. Zafar believes policymakers should focus on creating a level playing field where innovation can flourish within a regulated environment.

The government has already initiated efforts to bring some foreign trading and digital asset platforms, such as Binance, under regulatory oversight. Experts say a broader regulatory framework could help channel household savings into productive sectors while reducing risks associated with unregulated investment activity.

For PMEX, however, the larger objective extends beyond attracting traders. The exchange's leadership believes that commodity markets can serve as an important bridge connecting producers, consumers, investors and financial institutions.

If supported by stronger warehousing infrastructure, modern financing tools and greater public awareness, PMEX could evolve into a critical component of Pakistan's economic architecture, helping farmers secure better returns, industries obtain reliable supplies, investors diversify their portfolios, and policymakers build more resilient commodity markets.

In that sense, the future of PMEX may be defined not by the volume of contracts traded on its platform, but by its ability to bring order, transparency and efficiency to markets that have long operated in uncertainty.