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 on Tuesday.

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.

Vows no compromise on transparency

While talking to Dawn 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.

Talking to Dawn, CEO Arif Habib Securities Shahid Ali Habib said the consensus has been reached that the regulator would address the issues related to F-4/F-8 window in the futures trade from the next month.

“We have been assured that the matter would hopefully be resolved from October futures,” Shahid said.The PSX has been in the eye of the storm, melting away by as much as 46 per cent from the peak on May 2017. While licking their wounds and left to fend for themselves, the investors were encouraged by the SECP team’s arrival to deliberate with the stakeholders on various aspects that could plug further fall of the KSE-100 index that has lost almost 20,000 points in two years making it the worst performing market in the region.

Published in Dawn, August 21st, 2019