KARACHI: Pakistan Stock Exchange (PSX) CEO Farrukh H. Khan said on Friday more than 45 per cent of new investors that stockbrokers have onboarded in the last three months are from second- and third-tier cities.

Speaking at a roundtable on disruption in the capital markets, Mr Khan said more than 60pc of new investors in the last quarter have opted for the online opening of brokerage accounts as opposed to the paper-based, traditional on-boarding procedure.

The behavioural shift became possible partly because of the Sahulat brokerage account that the PSX launched in April. Investors can submit their computerised/smart national identity cards online to any stockbroker and immediately start investing up to Rs800,000 without the need for furnishing numerous income and bank documents.

A spokesperson for the PSX later told Dawn the latest number of investors with brokerage accounts is around 280,000. In an earlier interview with the newspaper, the PSX CEO had said the number of unique investors grew 14pc to 265,000 in 2021, marking a reversal of the five-year downward trend.

However, these are gross numbers and possibly include dormant accounts as well as those with minimal trading activity, the PSX spokesperson said.

“The sharing of data between banks and brokers has been a major breakthrough,” Mr Khan said while referring to the recent back-end arrangement that made it possible for brokerages to open new accounts based on know-your-customer (KYC) details obtained from commercial banks. He added that Roshan Digital Accounts — an online initiative that helps Pakistani expatriates invest in various asset classes, including stocks — have also been a resounding success in terms of seamless customer onboarding.

However, he acknowledged that problems continue to persist in online brokerage account opening for those investors who set up their bank accounts years ago through a paper-based document submission process.

Addressing the roundtable, Securities and Exchange of Pakistan (SECP) Chairman Aamir Khan said a “less than perfect” alignment with the real economy coupled with slow adoption of new ideas has held back the capital markets from achieving their true potential.

He urged the roundtable participants to focus on three areas. One, they must “digitise and spread their outreach” to the unserved segments of the population. Two, they should promote a “culture of innovation” in the capital markets.

He drew parallels from the SECP’s sandbox — a framework that allows fin-techs to test novel ideas in a controlled environment under the regulator’s supervision — currently in the third cohort after its rollout two years ago.

“The sandbox has fast-tracked the modernisation of the legislative framework,” the SECP chairman said.

He referred to the regulatory frameworks for equity crowdfunding, fractionalisation of real estate assets, robo-advisory, peer-to-peer lending and digital insurance as examples of the “learnings” from the sandbox programme.

Lastly, the SECP chief urged capital-market disrupters to leverage the existing strengths through “alliances, integrations and product bundlings”. “Where a single product provider might struggle, technology can enable multi-product distributional models at a fraction of the cost and target a much broader customer base,” he said.

Published in Dawn, September 24th, 2022