KARACHI/ISLAMABAD: Amid continuous declines at the stock market, a team of officials from the Securities and Exchange Commission of Pakistan (SECP) led by chairman Aamir Khan paid a visit to the brokers of Karachi.
During his maiden visit to the Pakistan Stock Exchange (PSX) on the third working day after assuming charge as SECP chairman, Khan held two separate meetings with stockbrokers — one with small players and the other with top management of major brokerage firms.
A participant at the deliberations said a wide range of issues came under discussion with different stakeholders, but those were short listed to some basic points that included: removal of practical difficulties concerning the use of F-8 window in the deliverable futures market, the review of Value at Risk (VAR)-based exposure regime, in particular additional margins imposed over and above VAR-based exposure margins and the liquidity margins in the ready market.
Other issues of immediate concern were to consider uptick rule on blank sales in the deliverable future market and allowing mutual funds to partially avail the borrowing limit currently allowed for redemption only for investing in the market.
While talking to after the visit, the SECP chairman said the market fundamentals are strong and positive but the current negative trend was mainly due to the “corrections after inflated and artificial management by the previous government including the management of exchange rate”.
“At the same time we have made it clear that there will be no compromise on transparency and violations by the brokers or investors,” Khan added.
He said the whole economy was in a transitory period as there was a paradigm shift and the recent regional geopolitical issues too have contributed to the downturn but expressed confidence that market would improve based on its potential. The small brokers were represented by the Pakistan Stockbrokers Association (PSA) President Basharat Ullah Khan who criticised the regulator for not taking the stakeholders into confidence.
The PSA President expressed concerns on reports that the SECP was planning to stop short- selling/blank selling and warned that such a move would lead to a massive drop in the volumes and could result in a nosedive for the market, he told Dawn following the meeting with the SECP.
The PSA was assured by the SECP that it would not ban short selling or bhatta — as it was locally called — but it will introduce an intentional system called “UPTICK” which will not allow blank sale to the buyers but they could place their bids in the queue for the potential buyers.
Moreover, the PSA highlighted that the PSX Board of Directors had not held any meeting with the SECP since May 2017.
The SECP officials met with a delegation of large brokerages and discussed several issues including the stringent Know-Your-Customer (KYC), Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) conditions on the grounds that it was discouraging investors.