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ISLAMABAD: The Securities and Exchange Commission of Pakistan has approved regulations governing market to improve trading activities at the Pakistan Mercantile Exchange Limited (PMEX) through promotion of liquidity and efficiency.
The concept is in line with best international practices as market-makers play an important role at the trading platform by providing two-way quotes, said an official of the Securities and Exchange Commission of Pakistan (SECP).
The official said that two-way quote regime supports trading at the exchange as both buying and selling options for the commodity future contracts would be available with the presence of market makers in the PMEX.
As commodity exchange is still in the developing phase in Pakistan, the most serious problem faced by sellers at the PMEX is lack of buyers, the official explained.
The SECP noted that several contracts having good potential for hedging have not been trading actively due to lack of liquidity, and the market has grown. Therefore, it is considered essential to encourage market makers to provide liquidity in such contracts under a regulated environment, benefiting hedgers and investors, the official added.
However, unlike wholesalers at traditional markets in the country the SECP has notified regulations covering the market-makers through their qualification criteria, roles and obligations of market makers.
Under the regulations, the market-making agreement would be well documented as per prescribed definition, powers, functions and obligations of PMEX and disciplinary actions may be taken by it for violating trading guidelines.
The market-makers will be allowed to get a margin of 5 to 10 per cent only and not allowed to fleece buyers or sellers by exploiting the situation, the official said, adding that unlike the traditional commodity markets, the buyer or seller can always lodge complaints against the concerned broker or the market-maker either to PMEX or the SECP.
