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KARACHI: The recent measures taken by the Securities and Exchange Commission of Pakistan (SECP) have been positively received by the stock market participants and the upward trend in the market is indicative of improving conditions in the capital market and signals increase in investor confidence and a positive outlook.

The KSE-100 Index on Thursday went up by 1.2 percent or 438 points and closed at the level of 36,133 points. The market closed on a positive note on the 10th consecutive sessions and the KSE-100 Index has increased by 7.2 percent or 2,432.54 points during the last ten sessions.

The PSX witnessed traded volume of 467 million shares which is a high of 147 trading sessions, last seen on December 05, 2019. Traded value also went up by 20 percent to $94 million, last seen on April 21, 2020.

Stock market participants think this is result of the SECP reforms related to the management of the stock exchange and improved framework and decision not to close the market in COVID as well as terror attack.

In line with SECP reforms initiative of responding to the needs of the capital market and promoting competition and ease of doing business, SECP has completely digitalized the IPO process for equity and debt issues, which has made the IPO process more easy, simple and cost effective. In a landmark achievement, for the first time the federal government raised Rs 200 billion through Sukuk at less than KIBOR rate, using competitive book building at PSX. Lower interest rate will result in savings of Rs 18 billion over 10 years in debt servicing. This transaction was oversubscribed by 70 percent and involved the team efforts of Ministry of Finance, Debt Office, the SECP, the SBP and PSX.

In line with the SECP reform initiative of introducing new products, an important milestone was the launch of Pakistan's first ever Exchange Traded Funds (ETFs) were launched at PSX on March 24, 2020 by UBL Funds and NIT. ETFs will help increase the retail investor base, as this product offers significant growth potential due to its transparent nature, low costs and embedded ability to track the index by following a passive investment strategy. Another major initiative for the development of capital markets in line with international practices was the widening of circuit breakers and introduction of market halts at PSX in December 2019.

Market halts triggered as a standard protocol for risk management were critical in bringing stability to the market during the recent market turmoil in March 2020. The seamless manner in which the process was concluded in a stressful situation, exhibited the strength of the risk management system in containing systemic risk, and allowing the market to stabilize.

As part of capital market reforms, and to protect investors, a new brokerage regime that balances the financial standing and compliance burdens of brokers in line with the role they may choose to perform in the market has been introduced.

Another key reform by SECP was approving PSX regulations for introduction of standard range/scale of brokerage commission of 3 paisa per share or 0.15 percent of the transaction value (whichever is higher) up to 2.5 percent of the transaction value as prescribed. It had been observed that many brokerage houses were charging nominal or zero commission rates that was affecting true competition and creating disparity in service standards. Implementing a standard range of commission will encourage brokers to improve their brokerage services and bring transparency and discipline to the market. Other regulatory measures to facilitate the capital market include the introduction of Murabaha financing to attract investors of Shariah compliance products; to help brokers improve their liquidity and working capital management, additional VAR margins imposed in 2017 and additional haircuts on securities deposited as collateral with NCCPL were abolished; in addition, security deposit requirements in the deliverable futures segment was also reduced significantly.

Copyright Business Recorder, 2020