ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has notified the Futures Exchanges (Licensing & Operations) Regulations, 2017, that have been issued under the Futures Market Act, 2016.

The salient features of the regulations include application of fit and proper criteria to the majority shareholders, directors and senior management officers, providing a code of conduct for the board of directors and senior management officers of a futures exchange.

Strict criteria have been laid in the regulations for directors, and any such person who has never entered into plea bargain with NAB.

The regulation also said that board of the futures exchange should comprise of a minimum of seven directors and each board should have one-third independent directors, while strict criteria have been laid down to become an independent director.

The regulations provide guidelines for the composition of the board of directors, appointment of chief executive officer and chief regulatory officer with the SECP’s approval as well as the related matters.

They also require management of the exchange to constitute a risk committee and appointment of a chief risk officer at the future exchange.

The risk committee would consist of independent directors, CEO, chief regulatory officer and industry experts.

The regulations have also highlighted that the futures exchange cannot outsource any of its functions without prior written approval of the Commission.

Records relating to all activities outsourced will be preserved centrally by the futures exchange so that it would be readily accessible for review by the board of directors the SECO or any other authority.

The new regulations also enlist financial resource requirements of minimum paid-up capital (net of losses) of Rs500 million. However, the existing futures exchange shall have three years to meet this threshold.

However, the paid up capital for the licence of new futures exchange is Rs1 billion.

The regulations have also been placed at SECP’s website.

Published in Dawn, June 24th, 2017