March 07: The Securities and Exchange Commission of Pakistan (SECP) has been undertaking a reform agenda to revitalize the market, with primary focus on measures to enhance liquidity, ease of doing business and address practical difficulties faced by market participants.
Investors are now allowed to pledge government securities as collateral in lieu of cash/bank guarantee in the futures market. This measure will promote investment in government securities by the investors. Further, up to fifty percent distribution of mark-to-market profit has been permitted in the deliverable futures market which will enhance liquidity in the market.
To curtail settlement risk in the deliverable futures market a close-out mechanism has been introduced which provides the manner in which positions of a defaulting market participants shall be closed-out. This would enable the clearing house to handle broker defaults by reducing systemic risk in the market.
Based on thorough consultation with the capital market reforms committee and other stakeholders, the concentration margin regime has been rationalized without adding any unnecessary risk to the clearing company in terms of its risk management measures.
These regulatory enhancements aim at bringing stability and ensuring robust growth in the market. The SECP shall continue to strive towards actively engaging stakeholders in the market reform process and put in place measures in line with international best practices and domestic market requirements.