KARACHI, Jan 1: The regulatory mechanism for “short selling” in stocks would be made public in the next few weeks, said the chairman of Securities and Exchange Commission of Pakistan (SEC), who was talking to journalists on the sidelines of the press conference called to announce “Companies Regularization Scheme” on Monday.

Khalid Mirza affirmed that short selling was not bad for the market provided it fulfilled the three basic rules: it should be priced on the ‘uptick’; the party declares that it is short and the delivery of security is actually made.

By contrast, he said, “blank selling”, was not permissible and rules restraining such trades had already been announced.

The SECP chairman observed that all the capital market reforms, stipulated under the Asian Development Bank loan of $250 million, had been implemented, that was why the whole loan had been disbursed (in two equal trenches). “Outside of (and before) the recent IMF Stand-by Programme, this was the only loan of which all trenches had been received by the country,” the SECP chief boasted.

He said the capital market reforms introduced in the last one-and-half years had brought about a sea-change in the regulation, governance, revival and strengthening of the capital markets. The commission, he said, now focused on ‘consolidating’ those reforms.

Answering queries regarding various outstanding matters, he said the technical committee was working on the re-insurance pool; the proposed changes in the Companies Ordinance had been forwarded to the Ministry of Commerce and that the committee to probe the matter of Hubco’s forged fax was to present its report by December 31, but might seek more time. He said that the broker community was realizing that “de-mutualization” was in their own interest and stated that of the 56 top stock exchanges in the world, 32 had already de-mutualized, while another 16 were in the process of doing so.

Finally, the SECP chief expressed his disagreement with the hackneyed slogan that ‘stock markets are barometers of country’s economy’. He said the truth was quite opposite — not just here but everywhere in the world. “When the economy is in recession, stock markets are often seen to be climbing and when the economy is booming, stocks tend to tumble,” he said and reasoned that economy constitutes only 10 per cent of the market trend, the remaining 90 per cent being driven by ‘psychology or sentiments’.