The Securities and Exchange Commission of Pakistan (SECP) has helped the DMO conduct 18 auctions, raising Rs. 2.25 trillion since December 2023 through Ijarah Sukuks.
Trading volumes in the secondary market have been increasing gradually as market participants become familiar with this system, read a statement by the SECP. The initiative is the result of active collaboration of stakeholders, including the Ministry of Finance, DMO, SECP, State Bank of Pakistan, banks, Census of Manufacturing Industries, mutual funds and brokers.
Traditionally, government debt securities were issued, and traded in over-the-counter market. In December 2023, the Ministry of Finance decided, with the approval of the federal government, to utilize the services of capital market institutions for issuance, registration, trading, settlement and transfer of shariah compliant GDS. The SECP supported the Finance ministry in this decision and worked closely with the DMO and the CMIs in its implementation.
Issuance, registration, trading, settlement and transfer of GDS through CMIs required amendments by the federal cabinet in rules pertaining to GDS; amendments in regulations by the CMIs; and development and deployment of relevant processes, procedures and software. Extensive support was also provided by market participants, including banks, mutual funds and the brokerage industry.
Various steps have been taken by CMIs with the approval of SECP over the last few months to support the GDS market, including rationalization of brokerage commission, revaluation mechanism based on brokers quotation model, same-day settlement and direct access to the secondary market trading for banks and mutual funds, among others.
These initiatives aim to enhance transparency, competition, efficiency and tax collection in the domestic debt market by ensuring confidentiality of bids; providing electronic trading platform; widening the distribution network; standardizing trading and payment systems; promoting the use of technology; and creating necessary checks and balances.
SECP remains committed to working closely with the Ministry of Finance for the development of the domestic debt market. Greater transparency, wider outreach, more competition, standardized processes, and necessary checks and balances lead to higher investor confidence and market efficiency. This initiative is leading in the right direction and broadening the opportunities for investors as well as the government, and contributing to the country’s economic growth.