SECP links short selling with uptick rule in future market

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In the wake of COVID-19 and its unprecedented effect on global stock markets, the Securities and Exchange Commission of Pakistan (SECP), in consultation with market stakeholders and market infrastructure institutions, has decided that for the April 2020 contract, short sale in 36 specific shares of the future market shall be subject to an uptick rule.

This will ensure the provision of required prior notice period to the market and retain liquidity in the rollover week.

Further, to support the mutual fund industry, the maximum period of borrowing by mutual funds for redemption purposes will be extended from the existing 90 days to 360 days.

Moreover, the commission has allowed relaxing deposit requirements against the base minimum capital of TREC holders.

The requirement to perform biometric verification at the time of opening of account is eased and the biometric verification may be performed within 90 days. However, other KYC requirements as per the CKO and NCCPL Regulations including VERISYS shall remain applicable.

Earlier, a number of facilitative measures were undertaken by the SECP, which include (i) collection of market-wide concentration margins at the specified threshold to rationalize mode of implementation, (ii) near cash instruments collected as acceptable market collateral against exposure by NCCPL, (iii) inclusion of close-out mechanism in DFC market, (iv) release of 50pc MtM profit in deliverable futures market on T+1 basis and (v) amendments to the Listed Companies (Buy-Back of Shares) Regulations, 2019 to remove free-float condition for shares to be held as treasury.

Over the last couple of weeks, the SECP has been maintaining close coordination with the stock exchange, clearing and depository companies and has held multiple sessions.

“It is comforting that the various risk management measures and market halts instilled in the stock market are working effectively, margins were collected in a timely manner and no settlement issues were witnessed,” the commission stated.

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