CSF returns, interest doesn’t

December 02, 2025 (MLN): The long-forgotten Cash-Settled Futures (CSF) made its way back onto the trading board, a product celebrated across global markets but treated with suspicion at home.

The launch held a sense of déjà vu. Traders glanced at the screen, waited for activity, and then moved on as if nothing new had arrived.

Within two days, barely 130,000 shares changed hands across six scripts, with just 83,000 traded today, an underwhelming debut for a product that once promised modern market reform, clearly showing a lack of interest.

CSF first came to life back in 2007, struggled in silence, and finally disappeared in 2021.

Four years later, it returned with hope of a fresh start, yet the market once again greeted it with indifference.

What cash settlement mean?

A cash-settled contract ends with a simple payment of profit or loss instead of physical delivery of shares. This method helps investors reduce costs and avoid the operational pressure of handling the actual asset.

In many countries, this type of contract supports hedging, arbitrage, and leveraged positions.

On paper, PSX should benefit from the same strength, but several practical hurdles keep investors away.

100% cash margin blocks interest

The largest hurdle sits in the margin requirement. CSF demands a full cash margin. In comparison, the Deliverable Futures Contract (DFC) allows a mix of cash and eligible stocks.

Most investors prefer stock-based margin because their funds already sit inside the market.

A full cash margin forces them to lock money aside, which reduces their flexibility. As a result, investors stay away from CSF and prefer DFC.

No market maker, no liquidity

A major structural weakness also exists. PSX does not have an active market-making system. In global markets, market makers keep buy and sell orders alive, hold spreads tight, and ensure smooth entry and exit.

 In Pakistan, the absence of this role creates fear of sudden traps, upper locks, lower floors, or dry liquidity.

Without a market maker, traders hesitate to enter a product like CSF. Once again, CSF stands weak when it should stand strong.

T+30 crisis is still alive

PSX is now shifting from T+5 to T+2 and plans to move to T+1 by February 2026. This shift is a major step toward modern standards.

 However, at the same time, the exchange keeps the T+30 Deliverable Futures Contract open. This contract structure has created market troubles for almost twenty years.

Each roll-over week brings uncertainty. Financers often pull funds at sensitive moments.

Markets fall sharply. Many bearish spells start with roll-over panic. When long positions rise, investors worry:
“Will my position shift to the next contract, or will I face forced selling?”

This repeated cycle still continues because the T+30 model remains untouched.

CSF can solve many problems, if….

Ironically, CSF can solve many of these problems. But it needs support. PSX must revise the margin rules.

Allowing eligible stocks as collateral, just like DFC, will make CSF far more practical and attractive.

Market makers must also enter the system to provide liquidity and confidence. Most importantly, PSX needs to gradually move away from the outdated T+30 structure.

This contract has triggered liquidity shocks for decades. A controlled transition toward cash-settled futures will create a more stable and mature derivatives market.

It is important to keep in mind that CSF is not an experimental tool. It is a global standard.

For PSX, it offers a chance to reduce repeated market stress, improve stability, and modernize the trading landscape.

The relaunch is a positive step, but true progress demands structural change.

If PSX wants a stronger and more resilient market, it must support CSF through better margins, active market makers, and a gradual phase-out of T+30 futures.

Only then will Pakistan’s equity market move closer to global practice and attract deeper participation.

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