Question: Congratulations on the remarkable profitability achieved by PMEX in FY23! Could you provide some key statistics regarding this accomplishment?
EAS: This has been an absolutely fantastic year in terms of profitability for PMEX. I am pleased to inform that, as per unaudited accounts, PMEX has achieved a net profit of PKR 207 million in FY23, a growth of 266 percent compared to the last fiscal year. During this fiscal year, the exchange’s operating income surged to PKR 673 million, representing an impressive growth of 80 percent compared to the previous year. The trading volume in FY23 reached a significant milestone of PKR 4.641 trillion, surpassing the PKR 3.867 trillion recorded in the corresponding period last year.
PMEX, on the basis of this year’s performance, has completely recovered its equity of PKR 313.6 million, which was negative PKR 192 million in FY11. Additionally, in achieving this phenomenal turnaround, PMEX has maintained a Settlement Guarantee Fund of around PKR 600 million over a period of time.
Question: What do you believe has led to this remarkable accomplishment?
EAS: It is important to highlight that PMEX’s achievement sets it apart from any other institution in Pakistan as no other similar entity has emerged in the same way as PMEX after being in a position of negative equity. We have not only established ourselves as the only licensed commodity futures exchange in the country but also gained recognition as a reliable platform for price discovery, risk management, and trading activities. What distinguishes us from other institutions in Pakistan is our commitment to promoting innovation, driving market growth, and providing service at global standards.
Several crucial factors have contributed to PMEX’s outstanding financial performance in FY23. The exchange has successfully implemented strategic initiatives, including expanding the product portfolio, introducing new members and liquidity providers, streamlining the Direct Fund Model to facilitate direct deposit & withdrawal of funds for traders, extending trading hours, introducing digital account opening, improving customer support, and raising awareness about the advantages of futures trading on a regulated exchange. These endeavors have helped enhance operational efficiency, reduce costs, and significantly improve the overall trading experience for market participants.
Having said the above, the strategic direction provided all these years by our Board of Directors and the unwavering support and guidance of Securities & Exchange Commission of Pakistan (SECP), being the apex regulator, has also played an instrumental role in our growth and success.
Question: Under your leadership, PMEX has undergone a remarkable transformation. Could you please share the key strategies or initiatives you implemented to achieve this turnaround?
EAS: When I joined PMEX, it was facing an existential crisis. The financial position of the organization was dismal as complete shareholder equity was lost and there was negative equity. To make things worse, the trading systems were old and had served their life, the team was in disarray and the organization’s market reputation was also not positive. In short, the organization required a complete overhaul while remaining within restricted resources and budgets.
Considering the situation, I felt that the most important factor that can turn around PMEX is a self-belief in the management team that such a transition is achievable. We started by taking small positive steps to build confidence, ensuring that all major decisions are taken with consensus and emphasizing within the organization that PMEX is an institution of national significance. In addition to the above, considering our strengths and positioning, we focused on retail clientele and expanded the portfolio of commodities accordingly.
Keeping the needs of our clients in mind, our team made conscious investments in the development of technological infrastructure, system upgrades, and process improvements. We have prioritized the training and development of our staff, aligning our focus with customer needs and business growth. The overall success we have achieved is a direct result of the unwavering dedication and hard work of our entire team and I am extremely proud of them.
Question: How has PMEX improved its customer experience in response to the rapidly evolving digital landscape?
EAS: PMEX has been proactive in enhancing the customer experience through digitalization. To achieve this, the Exchange pursued a two-fold strategy. First, the implementation of a fully Automated Direct Fund Model (DFM) enables direct fund collection from clients and facilitates the seamless transfer of funds to their bank accounts, eliminating the need for broker involvement. Second, the introduction of online account opening for retail customers streamlines the account opening process, making it convenient and accessible.
PMEX is confident that both the automated Direct Fund Model (DFM) and Online Account Opening will offer customers a secure, fast, and seamless experience, instilling confidence and promoting the use of technology while fostering financial inclusion. These initiatives are expected to revolutionize commodity futures trading in Pakistan and make a significant contribution to the country’s economic growth.
Question: How do you plan further growth?
EAS: Given the presence of over 55 million bank accounts nationwide and being a digital exchange, we perceive a tremendous opportunity to generate 2 to 5 million new Unique Identification Numbers (UINs) and achieve widespread penetration throughout Pakistan. We are actively exploring innovative business approaches and making relentless efforts to market our services to every corner of the country, providing more individuals with the opportunity to engage in futures trading on our platform. In light of this objective, we are establishing strategic partnerships with technology-driven entities to leverage their digital touch points for facilitating the digital account opening process, enabling their customers to trade futures on PMEX easily and conveniently.
Question: Can you elaborate on your upcoming strategies to enhance the depth of the futures market?
EAS: In order to enhance market depth and foster new avenues for market participants, the Exchange has devised plans to introduce futures contracts for Single Stocks, Physical/Digital Gold and Marketable Government Securities. With an expanded range of tradable products, brokers will be better equipped to meet the diverse needs of a broader market segment. Furthermore, customers will have the opportunity to diversify their investment portfolios, thereby further enriching their trading experience.
Question: How is PMEX contributing to bridging the gap between the Agriculture sector and the broader economy in Pakistan?
EAS: The ultimate objective of PMEX is to bring the local commodities onto the Exchange platform for trading. However, it is important to understand that PMEX serves two distinct markets 1) Cash settled market (international commodities) and 2) Cash settled/deliverable local futures. Our prime objective is to serve the local Agri market after gaining financial strength from the Cash Settled market.
In this regard, I am pleased to inform you that under the visionary leadership of Securities and Exchange Commission of Pakistan (SECP), the Electronic Warehouse Receipts (EWR) mechanism has been established in the country. The introduction of EWRs in the country offers three valuable options for farmers: 1) Secure storage of commodities to prevent distress selling and post-harvest losses, 2) Using EWRs as collateral for obtaining loans from financial institutions, and 3) Trading EWRs on the PMEX platform to efficiently sell their produce at fair prices.
Although we still have a long way to go, I am thrilled to announce that the trading of EWRs has commenced on the PMEX platform. This achievement marks a significant milestone in Pakistan’s history, as EWR trading on PMEX will establish a dynamic and unified national market for agricultural commodities, positively impacting the lives of smallholder farmers. We are confident that the creation of a pan-Pakistan market for agricultural commodities will contribute to the revitalization of Pakistan’s agricultural sector.
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