April 19, 2007	Thursday	Rabi-us-Sani 01, 1428

ISLAMABAD, April 18: After months of delay the Securities and Exchange Commission of Pakistan (SECP) has finally approved the Unified Trading System (UTS) of the Islamabad and Lahore stock exchanges.

The UTS will be functional from the end of this month, official sources said.

The system will provide a common trading platform to the members of both the stock exchanges, which will be interlinked through Digital Subscriber Line (DSL), optic fibre and radio link. After the implementation of the system the members of both the bourses will execute trade with each other through internet. As per the agreement the Islamabad Stock Exchange (ISE) members shall pay two paisa per share to the Lahore Stock Exchange (LSE) members as access fee.

“The UTS will be quite beneficial for investors as it will provide them better price discovery, risk minimization and cost effective trading through the joint trading platform of both the exchanges,” said an official announcement issued by the ISE here on Wednesday.

The basic problem of the market fragmentation still remains unaddressed in Pakistan despite some reforms being introduced by the SECP. The three stock markets are fragmented because trade offers of investors entered into trading system of one exchange could not be matched with those entered at another exchange, even if the security being traded is listed at all the exchanges.

Such fragmentation has been causing a number of problems for almost all the stakeholders, particularly the investing public. This has reduced liquidity, affected price discovery, caused risk in custody, increased cost of trade, affected quality of execution, reduced transparency in trading, obstructed market surveillance, thereby keeping market access limited and not letting the market realize its potential.

In order to address these problems, the ISE and LSE conceived the idea of having a common trading platform. With the onset of the UTS, it is expected that the fragmentation problem in the bourses would be redressed to a greater extent.