ISLAMABAD – Capital market reform measures have improved investor participation by making it easier to enter the market, said the annual report published here by Pakistan’s Security and Exchange Commission.
In this regard, not only domestic but also foreign investors and NRPs have also shown more interest in investing in our capital market.
According to the annual report, through the ease of the online account opening process for NRPs, about Rs 2.589 billion has been received for investment in securities as of June 30, 2021.
In addition, the online account opening service introduced in January 2021 resulted in more than 10,500 accounts being opened through this service, which accounts for about 38% of the total new UINs registered during the period, added The report.
The measures taken in response to the COVID-19 pandemic have also resulted in smooth market operations without any interruptions. Securities brokers maintained uninterrupted access to the market while investors continued to open their accounts across the country.
The report states that for the implementation of the new brokerage regime, the introduction of the Professional Clearing Member model is imperative. Following the provision of regulatory cover, a license was issued to a company to operate as a PCM, which paved the way for the finalization and introduction of broker categorization, thus paving the way for better investor protection.
In addition, PSX’s corporate governance has been strengthened, which will improve operational efficiency and the functioning of PSX in the capital market. Other corporate governance measures have removed excessive regulation and streamlined education and experience requirements for senior SRO executives. In addition, the reform measures promote investor confidence in our capital market, which translates into increased investor participation. Additionally, investors are being made easier to easily attend AGMs when AGMs are scheduled through PSX’s AGM Calendar and by encouraging companies to provide electronic modes for shareholders to attend AGMs, the Chairman added. report.
To perform continuous risk analysis, the SECP has a dedicated systemic risk wing to monitor cross-sector systemic risk indicators, macroeconomic and political developments, structural and regulatory issues affecting the markets. The SRW interacts internally through the Systemic Risk Review Committee (SRRC) and coordinates the efforts of the SECP at the national level through the National Financial Stability Board.
The SECP also coordinates with SBP on risk management at the micro and macro level and held various sessions during the year to get an overview of the risk protocols implemented in SBP. The initiative aims to increase inter-agency collaboration and capacity building to improve SECP risk functions and protocols.
In FY21, markets remained relatively stable, as evidenced by the performance of the benchmark, which improved over the year. This can mainly be attributed to higher yields, lower volatility and increased liquidity, compared to FY20.
Monitoring and reporting on a daily and bimonthly basis, for medium and long term analysis of the capital market against macroeconomic indicators.
During the year, a scenario analysis carried out in collaboration with NCCPL, to assess the resilience of the market in the event of a sharp decline in a short period of time. It was observed that even after a significant increase in margin requirements, the existing collateral levels proved to be sufficient to meet the additional margin requirements, suggesting that the existing regime effectively hedges market volatility.
An internal model developed by the SECP and NCCPL performs stress tests and forward-looking reverse tests on a daily basis, to provide insight into the resilience of margins, settlement collateral and other clearing house resources. The results indicate that there are numerous risk management protocols in place to manage any crisis in the capital market.