Tough compliments
KARACHI: In order to avoid tough regulations, two more members of the Pakistan Stock Exchange have surrendered their membership (Trading Rights Entitlement Certificates) to PSX, bringing the total number of surrenders to four so far, one official confirmed on Wednesday.
On Wednesday PSX officially disclosed the name of Muhammad Bashir Kamani Securities (Pvt) Ltd, who surrendered the certificate along with Amin Tai, a senior member of the PSX. Two more applications are pending with the management of the PSX; however, their names have not been disclosed yet.
Nadeem Naqvi, managing director of the PSX, told The News that they had received around four applications surrendering the membership.
“At least 15 more members would be surrendering their memberships in the coming days because of the coercive measures of the SECP in the name of regulations,” a top broker said on condition of anonymity.
Amin Tai Securities has around 10 clients with longer holdings of around five years. Majority of their clients are institutions. Tai family has its personal investment in the stocks as well.
The condition of declaring the brokerage house a public company if its revenues surpassed Rs100 million was the most difficult for the members of the PSX, said one member. They do not want to share their family business with anyone, as there was a requirement of appointing at least three independent directors at an investment of Rs100 million.
Besides, majority of small brokerage houses, facing hardships in compliance to such regulations were holding discussions with other members for surrendering their licenses. These brokers would continue their presence in the PSX by becoming investors of other brokerage houses, he said.
Apart from declaring their brokerage house a public company, mandatory certification from the Institute of Capital Markets (ICM) was another challenge for the brokers, many of whom were less educated, especially the older traders who were finding it tough and challenging.
Nadeem Naqvi said, “Regulatory regime requirement is getting tough.” But, they needed compliance to move forward in the MSCI index.
He said under integration of all three stock markets in Pakistan, there were two options for those brokers who kept a small number of investors and were the major investors themselves. Firstly, they could have gone for a merger. Secondly, “Those who are not for mergers can go out of the market after 12 months of integration,” he said. The integration took place on January 11, 2016.
“I sympathise with their issue, but we have set a developmental mindset for stocks to grow,” said the MD. “I want them to become more professional.”
He said the PSX had invested Rs75 million to develop the internet trading system KITS and was providing free terminals to brokers, but they were reluctant to adopt it, even though it would cut down their internet system expenses. More brokers from Islamabad and Lahore were adopting it.
“Market needs professionalism to develop it and increase the investor base,” he said.
PSX is based on 400 brokers in the country but there were only 250,000 investors. It was the responsibility of the brokers to bring new investors in the market, but with an exception to a few major houses, all others had failed to attract investors, Naqvi said.
The PSX management was doing the work of brokers by organising programmes for new investors.