PSX executes best risk management practices, says MD

ISLAMABAD: Pakistan Stock Exchange Managing Director and Chief Executive Officer (CEO) Farrukh H Khan has said the exchange had implemented best risk management practices to safeguard investors and ensure its smooth functioning.

The exchange had to activate the Market Halt for nine times since its implementation in January this year, he said in an exclusive interview with APP.

“I can tell you that the market halt routine is a normal procedure in-line with the international best practices to safeguard investors and the overall market functioning,” Khan remarked and clarified that it was not something to be alarmed or get anxious about.

He said the Market Halt was activated eight times when the KSE 30 Index had a downside movement of 5 per cent and once when the Index moved upwards by 5pc.

The PSX CEO said the market halt procedure was necessary to avoid any situation of instability arising in the market due to extreme volatility. “The Market Halt is triggered when the KSE 30 Index reaches 5pc in either direction and stays there for 5 minutes, whereupon the market is halted for a period of 60 minutes.”

“During this period, marks to market margins are collected and there is a cooling off opportunity for investors to assess the market and think through their strategy. Hence such halts reduce the risk and help stabilise the market in times of extreme volatility,” he told APP.

Talking about the situation in regional and current global stock markets amid the Covid-19 pandemic, Khan said the situation had resulted in fall of markets globally.

However, he said the PSX management took charge of the situation before lockdown, with having necessary precautions in place at the exchange to arrest the possibility of spread of the virus, while making sure that business continuity plans are re tested and in place.

“We initiated certain administrative measures early on prior to the lockdown, including manual attendance system, checking the temperature of all visitors to PSX, installed hand sanitisers, reduced foot-fall and reduced attendance by 50pc of staff at the exchange by providing remote access to employees to work from home,” the PSX MD further said.

To a question, he said that at a time when markets are taking a downturn in the current crisis, there is an opportunity for long term investors to make an entry and hold long positions in order to reap the benefits of the attractive valuations now on offer at the stock market.

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