SECP Implements Stricter Regulations for Futures Exchanges in Pakistan

The Securities and Exchange Commission of Pakistan (SECP) has introduced new regulations that impose strict conditions on futures exchanges when handling the funds and assets of brokers and customers. The amendments to the Futures Exchanges (Licensing and Operations) Regulations 2017 were issued through an S.R.O. 1913 (I)/2022 on Wednesday.

According to the amended regulations, futures exchanges are now required to open designated bank accounts with scheduled banks in Pakistan for depositing funds belonging to brokers and customers. These accounts must be maintained in accordance with the rules specified by the futures exchange. Furthermore, the assets belonging to brokers and customers can only be used for purposes allowed by the law.

The regulations also emphasize that the assets of brokers and customers should not be considered part of the futures exchange's assets for any purpose. Records must be maintained for all amounts deposited and withdrawn from the designated bank accounts on behalf of each futures broker and customer. Additionally, the futures exchange must keep a record of balances for each broker and customer, including their names and the corresponding amounts held or received.

In cases where unutilized funds of brokers and customers are held in profit-bearing bank accounts, the futures exchange is required to pass on the earned profits to the respective parties in proportion to their unutilized balance. However, exceptions may be made if specified in writing by the broker or customer. Prior to deducting any service fees, the futures exchange is expected to gradually phase out the utilization of profits from unutilized funds for purposes other than those permitted by June 30, 2025.

These revised regulations by the SECP aim to enhance transparency and accountability within futures exchanges in Pakistan, safeguarding the interests of brokers and customers.