Regulator orders start of trade on stock market amid brokers’ call for shutdown

Updated March 24, 2020

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Fears of the 2008 debacle were revived during the last two weeks after global markets saw steep falls as brokers and the regulator brace for what could be a stormy opening. — AFP/File
Fears of the 2008 debacle were revived during the last two weeks after global markets saw steep falls as brokers and the regulator brace for what could be a stormy opening. — AFP/File

KARACHI: The Pakistan Stock Exchange (PSX) will continue trading through the lockdown, announced the Securities and Exchange Commission of Pakistan (SECP) in a late night statement on Monday.

The market was shut on the first day of lockdown on account of Pakistan Day. Fears of the 2008 debacle were revived during the last two weeks after global markets saw steep falls as brokers and the regulator brace for what could be a stormy opening.

“To ensure continuity of market operations, the SECP has adopted a plan and taken necessary measures to ensure continuity of business operations of its self-regulatory organisations including the PSX, Central Depository Committee (CDC), Pakistan Mercantile Exchange and the National Clearing Company of Pakistan Ltd (NCCPL) with minimum presence of staff in office while the majority will work from their homes”, the apex regulator said.

The regulator also listed certain relaxations for capital market stakeholders which include market halt threshold for the KSE 30 index reduced to three per cent from 5pc; market halt to extend till 90 minutes from current 45; market half shall not be triggered in last one hour and 45 minutes of trading session; delayed start of market i.e 10:30 instead of 9:30 on Tuesday and circuit breakers to reduce to 5pc from existing 7.5pc.

On Monday, a “mock exercise” was held to run the exchange remotely, participated by the PSX, CDC and NCCPL. The mock exercise tested successfully as 100pc officials of SRO performed and ran trading settlements and other functions successfully from home while more than 50pc brokers logged in remotely, according to the SECP.

Meanwhile, the PSX Stockbrokers Association (PSA)—a trade body of around 130 stockbrokers—has asked the regulators to shut down the market during the lockdown. In a statement, the association said the regulator should consider an “extension of the holiday of Mar 23 for such number of days as has been prescribed by the Sindh government in its shut down notice”.

The association cited “practical and operational difficulties” in conducting business as usual in the stock market. Some of the reasons highlighted by the union include: non-inclusion of PSX and its ancillary service providers in the definition of “essential service”; the transactions of the last two working days were subject to settlement from Mar 24 which would carry huge risk for the fraternity due to lockdown (in Sindh); the requirements of exposure and margin deposit on next working day is assumed to be huge as stock market might test number of halts before consolidating itself.

“Stockbrokers might not be able to gather the exposure and margins from its clients which might result in total chaos and give rise to operational, settlement and systemic risk,” the PSA said and concluded: “We [stockbrokers association] are of the considered view that the present situation comes under force majure and it is indeed need of the hour to extend the holiday of Mar 23 for such number of days as has been prescribed by the Sindh government in its shut down notice.”

Published in Dawn, March 24th, 2020