PSX executes best risk management practices: MD

Managing Director and Chief Executive Officer (CEO) of Pakistan Stock Exchange, Farrukh H Khan said the exchange had Implemented best risk management practices to safeguard investors and ensure its smooth functioning.

The exchange had to activate Market Halt for nine times since its implementation in Jan this year, he said in an exclusive interview with APP.

"I can tell you that the market halt routine is a normal procedure in-line with international best practices to safeguard investors and the overall market functioning," he remarked and clarified that it was not something to be alarmed or get anxious about. He said the market halt was activated eight times when the KSE 30 Index had a downside movement of 5 percent and once when the Index moved upwards by 5 percent.

He said the market halt procedure was necessary to avoid any situation of instability arising in the market due to extreme volatility. The market halt is triggered when the KSE 30 Index reaches 5 percent in either direction and stays there for 5 minutes, whereupon the market is halted for a period of 60 minutes.

During this period, marks to market margins are collected and there is a cooling off opportunity for investors to assess the market and think through their strategy. Hence such halts reduce the risk and help stabilise the market in times of extreme volatility, he told APP.

Talking about the situation in regional and current global stock markets amid Covid-19 pandemic, he said that the situation had resulted in fall of markets globally. However, he said that the management of PSX took charge of the situation before lockdown, with having necessary precautions in place at the exchange to arrest the possibility of spread of the virus, while making sure that business continuity plans are re tested and in place.

"We initiated certain administrative measures early on prior to the lock down, including manual attendance system, checking the temperature of all visitors to PSX," installed hand sanitizers, reduced foot-fall and reduced attendance by 50% of staff at the Exchange by providing remote access to employees to work from home.