Stock brokers resent exclusion from reforms process

KARACHI: Brokers have expressed disappointment over exclusion from the reforms process initiated by the government to rev up the stocks market that lost more than 32 percent in one year, sources said on Saturday.

The sources alleged that Stock Brokers Association (SBA) has been left out from the process of reforms. The Securities and Exchange Commission of Pakistan constituted a committee comprising of senior market professionals / stakeholders to review the current market situation and provide recommendations for increasing liquidity, promoting ease of doing business and addressing practical difficulties being faced by market participants.

The sources said the SECP chose 18 professionals from large brokerage houses out of total 240 brokerage houses, which comprise of large, medium and small companies.

“Only a handful of people from large brokerage houses were selected in the committee,” an official said, requesting anonymity. “Hence, fate of 222 stock members will be decided by a handful of large companies.”

The sources said the SBA has not been considered to be added in the committee. “Therefore any decision by such committee would protect only the interest of few large brokers and hence their decisions would be biased and unacceptable to the TREC (trading rights entitlement certificate) holders at large,” a source in the SBA said.

The SECP said the committee was formed in consultation with the relevant stakeholders. The committee was tasked to review existing stock market conditions including trading volumes and recommend measures to enhance liquidity and remove hurdles if any towards active trading. They would identify the issues being encountered in the deliverable future contracts, analyse effect of recent reforms and provide recommendations to address any genuine concerns or practical difficulties identified. The committee members are expected to spot regulatory requirements, which may be hampering the growth of market or creating unnecessary burdens and provide suggestions for reform measures.

The committee could form sub-committees or invite participation from financial institutions and small brokerage houses, including Lahore and Islamabad -based brokers, while formulating its recommendations. The SECP asked the committee to submit its recommendations / report to the commission within one month.

Pakistan Stock Exchange started its journey from 42,446 points with market capitalisation standing at Rs8,703 billion when the government took office in August last year.

The stock exchange received heavy battering and the benchmark index trimmed 32 percent or 13,682 points during the year. Market capitalisation fell more than Rs2,797 billion with key scrips plunging sharply.

Brokerage Topline Research, however, said investors sentiment turned positive after long-awaiting measures regarding improving liquidity on the stock exchange were finally announced by the SECP. Main measures include relaxation of margin requirement for brokers and introduction for Murabaha share-financing.