KARACHI: For developing an Islamic capital market in line with best practices globally, the Securities and Exchange Commission of Pakistan (SECP) is contemplating the establishment of a shariah board, an official said on Saturday.
The board, comprising eminent Islamic scholars and market professionals, would ensure that all the products/ services offered under this umbrella are in conformity with the shariah principles.
“Also, efforts will be made for consolidation of existing Islamic institutions and development of innovative shariah- compliant institutions, products and services in order to deepen the capital market,” the official said.
It may be mentioned here that in consultation with relevant stakeholders, the SECP has drafted a comprehensive three-year Capital Market Development Plan (2012-14).
The said plan envisages introduction of key structural and regulatory reforms, development of equity, derivative, debt, commodities and currencies markets, development of shariah-compliant investment alternatives, and measures for improving governance, risk management, efficiency and transparency in capital market operations.
Talking about the future roadmap, the official said that in line with the international best practices, efforts would be undertaken for the National Clearing Company of Pakistan (NCCPL) to function as central counter party with the establishment of a settlement guarantee fund; and consolidation of risk management at NCCPL.
Besides, for developing the commodities market, the SECP might explore the possibility of allowing new commodity exchanges to function in the country, as presently the potential offered by this market segment was not being utilised to the maximum.
“The said measure will also facilitate healthy competition and business in this segment while contributing towards greater market outreach,” he said.
Regarding new product/system development, the future SECP agenda includes cross-listings of derivatives based on foreign indices at Pakistani stock exchanges to boost activity in index futures market.
For investors in the commodities segment, efforts will be made for introduction of new futures contracts in commodities like cottonseed oilcake, crude palm oil and maize, and rolling currency contracts on foreign currency exchange rate pairs.
To accelerate growth in the debt market in coordination with relevant stakeholders, the possibility of listing of government debt instruments at the stock exchanges will be explored and integration of National Savings Scheme instruments into the mainstream capital market, he said.
Further, to promote transparency and price discovery of debt securities and to minimize pricing issues of debt securities, establishment of an independent Bond Pricing Agency (BPA) conforming to international standards, is in the pipeline.
The BPA is expected to contribute towards stimulating activity in the primary and secondary debt markets, increasing market depth, reducing information asymmetry, increasing credibility of financial statements through accurate asset-liability valuation, product development etcetera, he added.