ISLAMABAD: The Secu­rities and Exchange Com­mis­­sion of Pakistan (SECP) is finalising the ‘brokers model’ — a framework that aims to define the roles of various market players.

The framework is expected to give leverage to small brokers and enhance their retail network whereas the large corporate brokers would concentrate on inviting listings in the stock market.

The new framework will be taken to the SECP Policy Board for consultations on April 11. The model will also help capital market players in the country to adopt best international practices as well as meet certain criteria of FATF requirements.

Take a look: ‘Stock market suffering from over-regulation’

The initial draft of the model stresses that stockbrokers would have to segregate their clientele in three categories – high, medium and low risk customers. Furthermore, brokers would be required to maintain their client base separately on the basis of identification, which would also help initiate awareness campaigns among the clientele by the PSX and the SECP.

“There are new anti-money laundering and Combating the Financing of Terrorism (CFT) laws globally and brokers need to be made aware of these,” Chairman SECP Farrukh Sabzwari said.

There is a need to spread the clientele base across the country — which is largely limited to Karachi only — but in the process the international best practices cannot be ignored, he said.

Currently the stock market of the country is facing two major challenges — lack of new listings and low volumes in daily trade.

However, Chairman SECP Policy Board Khalid Mirza has expressed concerns. He said the stock market is already over regulated and ‘more breathing space is required by the brokers.’

In the initial framework, chairman SECP noted that the ‘commission will be very friendly on regulation, but will also be very firm on enforcement’.

He said the SECP will relax certain restrictions to allow the market to determine the price of services by the brokers.

The SECP also believes that deregulation would make the capital markets more business friendly. The regulator plans to relax the requirements for renewal of trading licences and reduce documentation in this regard.

After the approval of SECP Policy Board, the framework will be presented for public consultations.

Published in Dawn, March 31st, 2019