PSX seeks feedback on rule amendments

July 02, 2026 (MLN): The Pakistan Stock Exchange (PSX) proposed amendments to its regulations covering two separate matters.

The first relates to shifting disciplinary powers concerning branch office restrictions.

The second proposes removing non-technical areas from the scope of Internet Based Trading Services (IBTS) audit under Chapter 9 to eliminate duplication with inspection areas already covered under System Audit Regulations in Chapter 23.

Public comments on the proposed amendments can be submitted by July 9, 2026.

Matter 1: Shifting of disciplinary power on branch office restrictions

Under the PSX Rulebook, a securities broker is currently barred from opening a new office or branch office if significant disciplinary action has been taken against it during the preceding three years.

The restriction applies where the action was taken by the Commission, Exchange, or CDC for material violations relating to misuse or unauthorized use of customers' assets, segregation of customers' funds, or unauthorized dealing with customers on a commission basis.

PSX proposed that this three-year blanket restriction be removed from Chapter 22 entirely and instead be decided on a case-by-case basis, considering risk factors including materiality, duration, and frequency of the violation.

To give effect to this, Regulation 20.5.2(d), which lists the general disciplinary actions PSX's Chief Regulatory Officer (CRO) may impose against TRE Certificate holders, is proposed to be expanded with a new sub-clause.

The existing list of disciplinary conditions or restrictions includes: decreasing capital adequacy by up to 50%; prohibiting the opening of trading accounts for new clients; restricting the buy side to prevent further exposure; and reducing the settlement period.

A new sub-clause (v) is proposed for insertion, empowering the CRO to prohibit the opening of new office(s)/branch office(s) for a specified period, on a case-by-case basis.

The two subsequent existing sub-clauses allowing trading under a pre-settlement mechanism only, and restricting or suspending a broker's trading activities in a particular market/product are renumbered (vi) and (vii) accordingly.

Correspondingly, Regulation 22.2(a) under Chapter 22 (Brokers' Office/Branch Office Regulations), which currently ties branch office eligibility to the absence of significant disciplinary action over the prior three years, is proposed to be deleted in its entirety.

PSX stated the amendment is aimed at striking an optimal balance between the regulatory priority of investor protection and the strategic business requirements of market penetration, financial inclusion, and branch-led customer engagement.

Matter 2: Removal of non-technical areas from IBTS audit scope

PSX also proposed amendments to Chapter 9 (Internet Trading Regulations) to remove non-technical areas from the IBTS audit scope, citing duplication with inspection areas already covered under the System Audit Regulations in Chapter 23. The salient features are as follows:

• Non-technical areas of IBTS audit already covered under Chapter 23's System Audit scope are proposed to be removed from Chapter 9.
• Non-technical areas exclusively covered under Chapter 9 are proposed to be added into the System Audit scope under Chapter 23 to ensure completeness.
• The requirement for a separate IBTS audit covering non-technical areas, and submission of a related audit report, is proposed to be deleted from Chapter 9.

Going forward, all non-technical areas of IBTS audit will be covered solely under System Audit, while the remaining technical areas will continue to be covered under Vulnerability Assessment and Penetration Testing (VAPT) audit requirements under Chapter 9.

Specific clause-level changes proposed include:

Clause 9.12 (retitled from "Periodic Audit, Vulnerability Assessment and Penetration Testing" to "Periodic Vulnerability Assessment and Penetration Testing ('VAPT')"): Clause 9.12.1 is revised to require VAPT of IBTS systems to be conducted independently once every two years, removing the reference to auditing of "systems, controls and procedures."

Clause 9.12.2 is revised to require submission of the VAPT audit report to the Exchange within the time and manner specified by the Exchange, replacing the earlier fixed two-month submission timeline.

Clause 9.12.3 is revised so broker liability to rectify non-compliances is triggered specifically by vulnerabilities identified in the VAPT audit report, removing references to the IBTS audit report and to non-compliances in "systems, controls or procedures."

Clause 9.15 (retitled "Suspension and Cancellation of Internet Trading Certificate"): Clause 9.15.1 is revised to remove the CRO's assessment of "effectiveness of systems and processes" and conducting of vulnerability assessments based on predetermined parameters, retaining only the review of the VAPT audit report submitted under Clause 9.12.

The former Clause 9.15.2 is renumbered 9.15.1 and revised to specify that CRO suspension powers apply if the VAPT audit report indicates vulnerabilities as mentioned in Clause 9.12.3, with continuation of suspension tied to removal of the cause rather than compliance with violated regulations.

The former Clause 9.15.3 is renumbered 9.15.2 with no substantive change, retaining the broker's right to appeal for revival of the Internet Trading Certificate under Clause 20.4.

Chapter 23, Schedule A (Scope of Audit): Two new sub-clauses are proposed for insertion under Section 8 (Internet Trading). New Clause 8.8 requires verification that a broker's operational capacity meets requirements stipulated under Clause 9.8 of Chapter 9.

New Clause 8.9 requires verification that a broker's service availability and business continuity arrangements meet requirements stipulated under Clause 9.9 of Chapter 9.

Guidelines for submission of comments

Comments can be submitted via email at comments.rad@psx.com.pk or by mail to the Chief Regulatory Officer, Pakistan Stock Exchange (PSX).

Respondents are advised to provide their name, company name (if applicable), designation (if applicable), contact number, and email address, as anonymous responses may be disregarded.

They may also request confidential treatment for their identity or any part of their comments by clearly identifying the information they wish to keep confidential.

PSX will publish relevant comments along with its management's responses in a Response Paper on its website after the public consultation closes and following approval from the Securities and Exchange Commission of Pakistan (SECP).

All responses will be shared with the SECP, regardless of any confidentiality request, as the proposed amendments may require regulatory concurrence.

The notice (PSX/N-806) was issued on July 1, 2026, and signed by Ajeet Kumar, Chief Regulatory Officer, PSX. Copies were also circulated to the SECP and other relevant market institutions.

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