PSX proposes amendments for Shariah-compliant trading framework

February 23, 2026 (MLN): The Pakistan Stock Exchange (PSX) has proposed sweeping amendments to introduce a comprehensive regulatory framework for Shariah-compliant securities trading, in a move aimed at strengthening Pakistan’s Islamic capital market infrastructure and boosting investor confidence in faith-based investment products.

PSX has invited stakeholders to submit comments, latest by March 02, 2026 on the proposed amendments before final approval by the Securities and Exchange Commission of Pakistan (SECP), the apex regulator of the country’s capital markets, according to a notice issued by PSX.

The proposals, outlined in a public consultation document, seek to establish a new Chapter 4A titled “Shariah-Compliant Securities Trading.”

The chapter would define eligibility criteria, operational procedures, governance standards, trading restrictions and compliance mechanisms for brokers intending to offer Islamic brokerage services.

Under the proposed framework, only brokers certified as Shariah-compliant companies, or those operating wholly owned Shariah-compliant subsidiaries or dedicated service windows, would be allowed to provide Islamic brokerage services.

Such entities would be required to obtain certification under the Companies Act, 2017 and comply with the Shariah Governance Regulations, 2023.

Before being granted a Trading Rights Entitlement (TRE) certificate, applicants would also need an opinion from a Shariah Supervisory Board or a registered Shariah Advisor confirming adherence to Islamic principles and the adequacy of system-level controls.

Existing brokers seeking to open Shariah-compliant service windows would be subject to similar requirements and regulatory guidelines.

To ensure operational segregation, Shariah-compliant trades would have to be executed through dedicated trading terminals known as Shariah-Compliant Trading Counters, separate from conventional brokerage activities.

Brokers would also be required to use specially notified Customer Relationship Forms and Sahulat account-opening forms tailored for Shariah-designated clients.

The segregation is intended to prevent commingling of Islamic and conventional transactions and ensure a fully compliant investment environment.

A central feature of the proposed amendments is the introduction of stringent pre-trade validations.

For buy orders, brokers would be required to verify that the security appears on the official Shariah-compliant list and that financing is conducted strictly through approved Islamic modes, such as Murabahah-based share financing.

For sell orders, brokers must confirm actual ownership and availability of shares, settlement of prior purchases, and the absence of encumbrances including pledges, liens or freezes.

The framework prohibits conventional practices deemed inconsistent with Islamic principles, including short selling, blank selling, sale of unsettled purchases, derivative contracts, trading in preference shares and subscription rights, and interest-based leverage or financing.

However, Shariah-non-compliant securities may be sold solely for divestment purposes.

All Shariah-compliant trades would be cleared through the National Clearing Company of Pakistan Limited (NCCPL) on a T+1 settlement cycle.

Importantly, purchased shares could not be resold before actual settlement and credit into the investor’s account at the Central Depository Company (CDC), reinforcing the Islamic principle that ownership must precede sale.

The proposed framework also places strong emphasis on Shariah governance and oversight. Brokers would be required to appoint a Shariah Supervisory Board or Advisor and implement internal mechanisms for continuous compliance monitoring across operations and systems.

The amendments include provisions for product and process review, income purification mechanisms, mandatory divestment of securities that become non-compliant, and oversight of dividend distribution and compensation matters.

Marketing materials would need to strictly adhere to Islamic principles, and firms would be required to clearly disclose whether they offer fully Shariah-compliant services or operate through a dedicated window.

To strengthen enforcement, the exchange has proposed incorporating Shariah-compliant brokerage requirements into system audit regulations, requiring external auditors to verify compliance with the new chapter as part of regulatory audits.

Once approved, the framework is expected to formally institutionalize Islamic brokerage operations at the exchange level, potentially expanding participation from Shariah-conscious investors and reinforcing Pakistan’s position in the global Islamic finance industry.

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