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Capital market achievements in five years

The Ministry of Finance Government of Pakistan mentioned in a statement that in past few years government has recorded significant developments and reforms for capital market and corporate sector of the country. The Securities and Exchange Commission of Pakistan (SECP), being the apex regulator, has continued to push with the reform agenda to address issues of a fast rising market during the past 5 years 2013 to 2017. The reforms agenda include the following;

Demutualization of stock exchanges

The Government officials said that consequent to promulgation of the Stock Exchanges (Corporatization, Demutualization and Integration) Act, 2012 the stock exchanges were fruitfully corporatized and demutualized in August 2012. Demutualization resulted in segregation of commercial and regulatory functions and separation of ownership and trading rights of the stock exchange.

Integration of stock exchanges

PSX (Pakistan Stock Exchange) became operational from Jan 11, 2016. Integration of three stock exchanges has provided various advantages in terms of reducing fragmentation, rising efficiency and enhancing governance standards.

Divestment of shares to strategic investors

The deal for strategic sale of 40 percent of PSX shares to an anchor investor consortium comprising leading Chinese exchanges and Pakistani financial institutions was completed by December 2016.

Sale of stake & self-listing

Public subscription of 20 percent shares of PSX was fruitfully completed, subsequent to completion of divestment process. With commencement of formal trading of PSX shares on its trading platform from June 29, 2017, PSX has become the first South Asian self-listed stock exchange.

Morgan Stanley Capital International (MSCI)

Based on Pakistan’s improved macroeconomic indicators, government’s investment friendly strategies, and ongoing reform process, the country was upgraded from MSCI’s Frontier Markets to Emerging Markets in May 2017.


Promulgation of major laws

The finance ministry mentioned in a statement that the Securities Act, 2015 was promulgated with effect from May 2015. It acts as a comprehensive modern law, which caters for deficiencies in earlier law and incorporates worldwide benchmarks of securities regulation and investor protection. Furthermore, the Futures Market Act, 2016 was promulgated in April 2016, which contains dedicated provisions for derivatives markets and is planned to protect public interest through a system of effective self-regulation of futures markets/clearing systems. It is also mentioned that the Companies Act, 2017, which has repealed the Companies Ordinance 1984, is one of the most significant legal reforms in Pakistan.

Risk management

Investor Protection Fund (IPF) of PSX has been replaced with the Centralized Customer Protection and Compensation Fund as mandated under the Securities Act, 2015. The Fund is now operational in accordance with the rules and regulations framed under said Act. Amendments made to the PSX Regulations for a major overhaul of regulatory framework governing firms in violation/non-compliance of applicable laws, enabling earlier warning to financiers, wider dissemination of defaults of such firms, stronger enforcement actions against such firms and their sponsors, directors and management, and earliest possible relief to financiers.

Many extra grounds for placement of a company on the PSX defaulters’ segment have been launched and the accepted amendments address issues posed because of immediate suspension of companies’ consequent to action by PSX under its regulations. Services from international as well as local institutions were employed to determine financial resource requirements and capital benchmarking of NCCPL. The experts also recorded that in line with the Centralized KYC Organization Rules, 2017, license of a Centralized KYC Organization (CKO) was granted to NCCPL along with approval of its regulations. Amendments relating to CKO have also been made to the PSX and CDC regulations, which entail replacing the existing PSX Trading Account Opening Form and CDC Sub-Account Opening Form with a single standardized Customer Relationship Form (CRF), which shall be used by brokers to open trading accounts, sub-accounts and investor accounts of their customers. CRF is to be used in conjunction with CKO Form, which contain no duplication.

Other reforms

Rules for establishment of a Bond Pricing Agency (BPA) will enable establishment of a BPA, were promulgated upon approval of the federal government after public consultation and Commission’s approval. With the aim of rising liquidity and activity in the MTS and DFM, a new Category B of eligible securities has been launched and relevant regulatory amendments have been made for the purpose. After incorporating relevant system changes, Category B securities for DFM have started trading effective January 22, 2018; whereas, Category B securities in MTS shall also become available shortly. SECP has notified the Sukuk (Privately Placed) Regulations, 2017 thereby replacing the Issue of Sukuk Regulations, 2015. Part of 2015 Sukuk Regulations relating to public offerings has been covered in the SECP’s Public Offering Regulations, 2017, through amendments therein.

In order to promote quality listing, to ensure fair price discovery through Book Building, and to cover part of the 2015 Sukuk Regulations relating to public offerings, SECP has made certain amendments to the Public Offering Regulations, 2017. Moreover, in order to facilitate the general public during IPOs, ES has been developed through CDC, in collaboration with 1-link (G) limited Through CES, financiers can submit application electronically through the internet, ATMs and mobile phones for subscription of securities of companies offered to the public.

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