ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has approved Securities Brokers (Licencing and Operations) Regulations 2016, which also takes into account the effect of integration of the stock exchanges and facilitates transition of brokers from the earlier regime to the new regime over an extended period of time.

The action of the regulator is part of the subsidiary legislation under the Securities Act, 2015.

A key aspect of the new regulations is categorisation of brokers into trading and clearing categories in line with global best practices to allow custodial functions with financially sound brokerage houses only.

Such brokers will also be subjected to additional control, reporting, compliance and other requirements to ensure risk management.

To achieve the said segregation, the concept of professional or general clearing member is also in the pipeline to facilitate clearing and settlement of trading by only brokers.

Also, brokers not involved in custody and clearing functions will be subjected to fewer requirements as opposed to brokers undertaking such functions. Additionally, due considerations have been made in order to facilitate the securities brokers by keeping the cost of doing business at a minimum.

The regulations introduce various new requirements and strengthen existing requirements for the securities brokers to help achieve the objectives of risk management.

The SECP had earlier invited public comments on the said regulations, subsequent to which open house sessions for all brokers of the three former exchanges were held.

To ensure maximum feedback from the brokerage industry, a committee of six TRE certificate holders of the Pakistan Stock Exchange, based on the nominations was received, which was constituted for detailed discussion on the subject regulations.

Published in Dawn, June 26th, 2016