ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) approved on Monday certain measures to ensure transparency and smooth trade on the Pakistan Stock Exchange (PSX) following the country’s reclassification as emerging market by MSCI, a US-based provider of investment decision support tools.

MSCI offers indices, analytical tools and data to global investors. It upgraded Pakistan from frontier market to emerging market on June 14, 2016. The reclassification will take effect on June 1.

The rebalancing of portfolios by global funds tracking MSCI emerging and frontier market indices is expected to result in a significant inflow of capital into the stock market post-June 1.

Considering the experiences of other regional markets that underwent such reclassifications in recent years, the SECP approved certain measures that were proposed by the PSX, National Clearing Company of Pakistan Ltd, international broker-dealers and local market participants for a seamless transition.

The SECP said minimal changes have been made to the system while the trade cycle continues smoothly.

The SECP has introduced a post-close trading session wherein trading will only be allowed at the closing price determined during the closing session of the market. This will allow investors to execute trades through market on close orders.

Additionally, it is expected that certain investors might prefer placing their orders at or near the closing time during the normal trading session so that their orders are filled as close to the official closing price as possible to reduce their tracking error.

In order to cater to the expected high volume during the closing session, the closing price for all shares will be determined over the last two hours of the regular market session on the basis of volume weighted average price (VWAP) as opposed to the current practice of last 30 minutes. This change will only be from May 26 to June 2.

The respective indices of the PSX will accordingly be calculated on the basis of closing prices under the revised arrangement for the said duration and revert to the current practice thereafter.

In order to facilitate the settlement of trades, the central bank has extended the timings for the real-time gross settlement system until 3:30pm during the first week of Ramazan.

Published in Dawn, May 30th, 2017