Categorisation: SECP implementing new regime for brokers

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) will implement the new brokers’ regime for categorising brokers according to their financial resources and governance requirements.

According to the SECP’s annual report (2020-21) released on Saturday, a Professional Clearing Member has already been launched. Brokers meeting higher benchmarks would be permitted to retain custody of investors’ assets while brokers unable to comply with such requirements shall be required to transfer custody of investors’ assets to a third-party professional clearing members or another securities broker.

The SECP said that the capital market reform measures have improved investor participation by allowing ease of entry into the market. In this regard, not only domestic but foreign investors and NRPs have also shown more interest in investing in our capital market. Owing to the facility of the online account opening process for NRPs, approximately Rs2.589 billion funds have been received for investment in securities as of June 30, 2021. Further, the online account opening facility introduced in January 2021 has resulted in the opening of more than 10,500 accounts through this facility, which forms approximately 38% of total new UINs registered during the period.

For the implementation of the new brokerage regime, the introduction of the Professional Clearing Member model is imperative. Subsequent to the provision of regulatory coverage, license has been issued to a company to function as PCM which has set the stage for finalizing and introducing brokers categorization, thus paving the way for enhanced investor protection.

Institutional investors: SECP launches Stewardship Framework

The Securities Act, 2015 and the Futures Market Act, 2016 are being reviewed for amalgamation and rationalization of various requirements therein for removing redundancies, impediments and barriers to entry, and upholding technological innovation and investor protection, the report said.

Enhancing scrip-based circuit breakers from 7.5 per cent to 10 per cent and introducing a second tier of index-based market halts in order to enhance efficient price discovery in the market and curtailing extreme volatility at the market-wide level. In this regard, regulatory amendments in PSX Regulations have been approved for initiating phased expansion of circuit breakers.

The SECP further said that the introduction of a robust and efficient New Trading and Surveillance System at PSX to offer significantly enhanced capacity and better speed. The new trading system will be instrumental in product innovation, development of derivative market and investor protection in Pakistan’s securities market.

Strengthening linkages between the banking industry and capital market for domestic customers, on similar lines as seamless online account opening for NRPs through the RDA initiative. By enabling individuals to open their trading accounts through banks, this measure would help in increasing access of local market investors and enhance ease of doing business through electronic means. Efforts are also being made to enhance customer onboarding through the telecom sector.

Further improvements in the IPO process, to shift approval-based requirements to disclosure-based, requiring only listing approval by the securities exchange. Introduction/Revamp of legal framework for asset backed securitization transactions, Special Purpose Acquisition Company (SPACs), and exempt offerings.

Copyright Business Recorder, 2022