The State Bank of Pakistan (SBP) has announced the launch of a new centralized foreign exchange trading platform for interbank transactions.
Named FX Matching, this platform is designed to facilitate real-time and anonymous trading of US dollars against Pakistani rupees among authorized dealers.
As outlined in a recent circular by the SBP, the introduction of FX Matching aligns with the bank’s Vision 2028 objectives to innovate and expand the digital financial ecosystem in Pakistan.
This platform is a critical step towards augmenting the interbank foreign exchange market’s transparency and depth.
Authorized dealers, or ADs, have received specific instructions and key components for the FX matching system to initiate trading. The platform mandates a minimum trading lot size of $500,000 and its multiples.
Notably, the trading will be conducted anonymously, allowing participants to quote or respond to quotes without revealing their identities until a trade match occurs.
Furthermore, each participant can set credit limits for their counterparts in FX Matching, with the SBP advising them to establish limits with major market players for optimal quotes.
Starting January 29, 2024, banks are required to utilize the forex matching platform for executing interbank foreign exchange transactions that affect the foreign exchange exposure limit.
Additionally, in scenarios where the Federal Reserve Bank of New York is closed but the interbank FX market in Pakistan is open, trading on FX Matching will be conducted in Tom value.
This development comes in the wake of a recent International Monetary Fund (IMF) report, which urged the authorities to avoid formal or informal exchange rate restrictions.
The IMF emphasized that the SBP should limit its FX market interventions to building foreign exchange reserves and not hinder the rupee’s depreciation driven by market fundamentals.Â
The authorities are also expected to intensify efforts to eliminate existing exchange restrictions and multiple currency practices in early 2024.
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