Reform of the country

1. REFORMS 2006-2007
Monetary and Credit Control Measures, 2006-07
1. On 14th July 2006, SBP decided to refinance under the Export Finance Schemes (EFS) with immediate effect shall be 6.5%
p.a. The commercial banks shall, however, ensure that where financing facilities are extended by them to the exporters for
availing refinance facilities underEFS, their maximum margin/ spread does not exceed 1 % p.a. The final rate of EFS to the
borrowers shall, therefore not exceed 7.50 percent p.a.(SBP refinance rate 6.50% p.a. +1 % p.a. spread of the banks) as
against prevailing rate of 9% p.a.
2. On July 18,2006 SBP decided to revise the reserve requirements with effect from 22 July,2006 as under:
i) Cash Reserve Requirement (CRR)
a) Weekly average of 7% (subject to daily minimum of 4%) of total
b) Demand Liabilities (including Time Deposits with tenor of less than 6 months); and
c) Weekly average of 3 % (subject to daily minimum of 1 %) of total Time Liabilities (including Time Deposits with
tenor of 6 months and above)
ii) Statutory Liquidity Requirements (SLR)
18 % (excluding CRR) of total Time and Demand Liabilities.
3. On July 29, 2006 SBP decided that with effect from 31st July, 2006 the minimum rate of return to be paid by recipients of financing
facilities from SBP for meeting temporary liquidity shortage and SBP 3-day Repo facility against Government of Pakistan Market
Treasury Bills and Federal/Pakistan Investment Bonds has been enhanced by 50 basis points i.e. from 9% to 9.5% p.a.
4. To meet the large unmet demand in microfinance sectorand to strengthening institutionalcapacities of MFBs, the existing legal 7
regulatory framework was changed through Prudential Regulations for MFBs, which mainly relate to increase in maximum loan size,
investment of surplus fund, minimum income threshold,submission of audited financial statements,and declaration of Fidelity and
Secrecy. The revised Prudential Regulations for MFBs were enforced with immediate effect.
5. To contain intra-day money market rate volatility SBP with effect from 19th January 2007 decided to raise the daily minimum
requirements for Cash Reserves to 6% and 2% of demand and time liabilities respectively for all banks/DFIs including Islamic Banks.
While the weekly average CRR was kept unchanged at 7% and 3% of demand and time liabilities respectively.
6. In order to create awareness and to facilitate the public in making informed decisions, on July 14th 2006 SBP decided that
henceforth banks/DFIs shall make complete disclosures of the lending and deposit rates of all consumer products offered by then by
posting this information on their websites as well as prominently displaying on entrance/ or window of their branches.In ord er to
facilitate comparison, banks/DFIs would also disclose annualized percentage rates on all consumer products.
Various capital market reform initiatives introduced by the SECP during the outgoing fiscal year are as follows:
1. Risk Management During the year under review, the SECP explored the implementation of a new risk management stru cture,
based on international best practices, to improve the prevalent risk management framework at the exchanges. A new Risk
Management Structure (RMS) was introduced in December 2006, after a detailed review of the existing framework. The
salient features of the New RMS that included, among others, a new netting regime; a margining systembased on value at
risk (VAR) and capital adequacy.
2. Value at Risk (VAR) based Margining System: To reduce systemic risk at the stockexchanges the new marketing system has
been based at Value at risk (VAR) principle i.e. the maximum amount of money that can be lost on given scrip over a given
period of time with a given level of confidence. VAR provides an accurate statisticalestimate of the maximum probable loss
on a portfolio when markets are behaving normally. VAR is a state of the art risk management systempracticed
internationally and takes into account risk associated with each share based on historical data.
3. Netting: To recognize the true exposure of the market, the netting regime has been overhauled. Netting of exposure margin
has been disallowed across markets, across clients and across settlement periods. The previous prevalent practice of netting
increased the exchange risk and would hide actual magnitude of exposures. Presently, client level netting has been
implemented in the ready market with effect from March 5, 2007, and the same would be implemented in the futures market
from May 2007.
4. Valuation of Securities eligible to be held as security: In order to effectively categorize the collateral, all securities are now
classified on the basis of liquidity and volatility. Further, to ensure minimization of trading risk, haircut can now be applied

2. accompanied with impact cost analysis. Eligible securities, acceptable by the exchanges against deposit as exposure, are
presently being evaluated on the basis of the new Haircut Regime. Previously, only the turnoverand EPS of the scrip were
considered for ranking of eligible securities against deposit.
5. Mark-to-Market Loss Collection and profit Distribution: A new mark-to-market regime has been introduced at the stock
exchanges. Mark to market loss in any scrip is the amount payable by a member, on account of his clients and his proprietary
unsettled net position for a given day, to the clearing house due to difference between volume weighted average price of the
unsettled position and the “closing price” of the scrip at day end.
6. Position Limits: Market wide, member wide and client-wide position limits have been introduced in the market to avoid
concentration of positions and to restrain investors from being over leveraged. These limits have been linked with the free
float of the scrip and are expected to minimize the possibility of any market abuse.
7. Special Margins: In order to curb volatility and to mitigate systemic risk in the market, special margins have been introduced
that shall be payable on daily basis only if the weighted average transaction cost of a scrip in the CFS or Future Deliverable
Markets with respect to a member, is different from 26 weeks moving average price of that scrip in the Ready Market.
Other Reforms The following measures have been successfully introduced at the stockexchanges to strengthen integrity and
transparency in terms of price discovery and trade settlement:
8. Unique Identification Number (UIN): In pursuance of the Commission’s objective to increase market transparency and
improve its surveillance capacity, the Unique (Client) Identification Number (UIN) Systemwas launched at pre trade level on
1 August 2006 at all three stockexchanges after implementing the requisite software and hardware changes by the stock
exchanges and NCCPL. The UIN System establishes a traceable link between the executed trade and the investors at the
stockexchange. UNI systemhas significantly enhanced the risk management at client levels and improved the surveillance
and monitoring capacity of the SECP and the stockexchanges.
9. Free Float Index: In order to introduce a free float index that is representative of the market, the KSE- 30 Sensitive Index was
implemented with effect from September 1, 2006. The need for a market representative free float index was long felt as the
capitalization weighted KSE 100 Index strongly tilted to a few scrips. Free float is based on the proportion of shares readily
available for trading to the total shares issued and excludes the locked in shares.The criterion for the selection of scrips on
KSE-30 index was revised on 15 February 2007 in line with international best practices to include the impact cost as a
measure to gauge the liquidity of scrip.
10. Changes in Existing Continuous Funding System (CFS): SECP enhanced the CFS Limit to Rs 55 billion for the Karachi
Stock Exchange and Rs 10 billion and Rs 5 billion for the Lahore and Islamabad Stock Exchange respectively w.e.f.
November 6, 2006, considering the demand in the market and ban on in-house badla. Further, a revised eligibility criterion
for CFS scrips has been introduced which inter-alia takes into account impact cost and free float of the scrip.
11. Work in Progress: Introduction of CFS Mk II: In order to facilitate transparent and efficient financing for the market, the
SECP has proposed authorization of direct leverage finance in the form of CFS Mk II by eligible brokers, banks and non-
banking financial institutions.Further, to provide a level playing field for the Lahore and Islamabad stock markets the
centralized CFS Mk II will be developed at the National Clearing Company of Pakistan Limited.
12. Margin Financing: parallel with other modes of leverage financing SECP is continuing its efforts to promote Margin
Financing. Margin accounts allow investors to buy shares with a relatively small amount of cash or margin up front by using
the assets currently held in their accounts as collateral. Margin financing will effectively lead to monitoring of risk at three
levels. At first, the exchanges will monitor the risk at broker level and secondly the broker will carry out due diligence of his
customers. Thirdly, banks and DFIs providing margin financing will monitor the risk of providing margin financing to
brokers and or investors directly.
13. New Derivatives product Development: SECP is working towards the introduction of new derivatives products such as Cash -
settled Futures, Index Futures and Options; in line with international west practices in order to provide much needed avenues
of leverage financing to the market.
14. Demutualization: SECP is pursuing the process of demutualization and integration and is keeping a close liaison with the
stockexchanges and other stakeholders to drive the process.In this regard, on January 28th, 2006, SECP and the Karachi
Stock Exchange (KSE) signed a Memorandum of Understanding (MMMOU) on critical issues,which inter-alia covers
matters relating to the issuance and transfer of trading rihts, the moratorium period, Code of Governance, issuance of shares,
transfer of assets,shareholding structure and composition of Board of Directors. Moreover, in order to facilitate the proces s
of corporatization and demutualization, a new section 32E was inserted in the Securities and Exchange Ordinance, 1969
through the Finance Act 2006, which provided that all the Stock Exchanges shall stand corporatized and demutualized upto
December 31, 2007.

3. 15. New Futures Trading Act: A draft Futures Trading Act has been prepared which provides a comprehensive and independent
legal framework for the regulation of futures contracts.All the stakeholders were consulted before finalization of the
proposed law, which has been submitted to the Government for further process.New Securities Act: The Commission, in
order to remove various deficiencies in the existing Securities and Exchange Ordinance, 1969 had initiated work to formulate
a Draft Securities Act, 2005, which will ensure that the standards and practices followed in Pakistani markets conform to the
best in the world.
16. Voluntary Pension System (VPS): The Federal Government took the initiative of development of the private pensions in
Pakistan by allowing rebates for investments in approved pension schemes in year 2001 and vested the responsibility of
development of necessary framework and regulation of private pensions in the Securities and Exchange Commission of
Pakistan. The SECP has proposed the draft legislation for the Private Pension Schemes, by issue of the Voluntary Pension
System Rules, 2005
17. Regulatory Framework for private Equity Funds:Private Equity is the equity investment in an asset in which the equity is not
freely tradable in the stock market. A private equity fund raises contributions from smaller investors to create a capital pool.
Private equity can play a vital role by providing growth capital to the corporate sectorparticularly the SMEs. Draft of the
Private Equity Rules has been prepared by the Commission and is being finalized in the light of the recommendations
received from the market participants.
REFORMS 2007-2008
1. Key Recommended Reforms The Government of Pakistan is eager to continue its reform path, on all aspects of capital
market development. Towards this end, some action plans have been put forward that aim at enhancing the financial
markets of the country as a whole, among which are the followings:
2. • Strengthen the government securities market development by improving the efficiency and transparency of primary
market, gradually increasing the marketable government securities and reducing the issuance of nonmarketable securities
and strengthening the liquidity of secondary market.
3. • Consider shifting to a price discovery mechanism from the current policy of volume based PIB auctions,once the
spillover effects of the ensuing international financial crisis are over or reduced to a minimum. This will, in turn,
facilitate the development of credible sovereign benchmark as well as interest rate markets over the long run.
4. • Publish a quarterly PIBs issuance calendar, subject to a tight compliance with the timings stipulated in the calendar.
5. • Promote corporate bond market development by streamlining the issuance procedure and increasing the supply of
instruments by tapping potential new issuers.
6. • Adopt high standards oftransparency,public disclosure of financial information and corporate governance on the part
of corporations to strengthen their credit ratings and facilitate market access.
7. • Set up a corporate bond database,with details of issuances,convergence in rating and transactions undertaken,to
facilitate investors having complete information.
8. • Set up trading platforms for undertaking bond transactions.
9. • Encourage corporations to publicly issue debt rather than resorting to private placements by easing regulatory interface.
10. • Eliminate restrictions on investment in domestic bonds by foreign investors.
11. • Encourage secondary bond market activities.
12. • Permit issuance of unsecured bonds and develop a market for sub-investment-grade debt.
13. • Broaden the investorbase by promoting pension reform and strengthening the insurance and mutual fund sectors
development.
14. • Modify the investment guidelines for NBFCs.
15. • Reform the NSS to align their returns to those available in the market and target small savers by transforming NSS into
a modern retail program.
16. • Promote the relevant market infrastructure development and create an enabling environment for bond market
development by upgrading clearing & settlement arrangement, strengthening government cash/debt management
capacity, facilitating money market development and strengthening the credit rating industry.
17. • Improve the effectiveness of monetary policy implementation.
18. • Clarify oversight responsibilities among various regulatory agencies including MoF, SECP and SBP.

4. REFORMS 2008-2009
Capital Market Reforms Capital market reforms enable the capital markets to embrace new ideas and techniques
affecting it. These reforms are an integral component of the structural reforms being supported by the government to
restore macroeconomic stability and to build up the banking system, while developing a more contributing incentive
regime for financial industry. Significant progress has been made on capital market reforms, including adoption of
international standards and market practices and the streamlining of regulatory infrastructure to enhance surveillance and
enforcement. The SECP, as an apex regulator of the country’s capital markets, launched different reform programs
during the period under review which are mentioned below:
1. Regulatory Reforms SECP has promulgated the Listed Companies (Substantial Acquisition of Voting Shares and
Takeovers) Regulations, 2008 to provide for a fair, transparent and efficient systemfor acquisition of substantialvoting
shares and takeovers of listed companies in line with the Takeovers Ordinance. Furthermore, in order to strengthen the
risk management framework, increase investorprotection and awareness, and promote equity investment in the country,
various reforms were carried out by the SECP in the regulatory framework of the three Stock Exchanges, the National
Clearing Company of Pakistan Limited and the Central Depository Company of Pakistan Limited.
2. Developmental Activities During the year 2008-09, SECP has progressed to promulgate the Stock Exchanges
(Corporatization, Demutualization and Integration) Act, 2008. The National Assembly Standing Committee on Finance,
Revenue, Economic Affairs and Statistics approved the Act on January 26, 2009 and the Act is expected to be placed
before the National Assembly for its approval. The Act provides for conversion of the existing non-profit, mutually
owned stockexchanges to for-profit entities owned by the shareholders.This would enable segregation of ownership and
trading rights and will bring a balance among interests of different stakeholders of a stock exchange. Demutualization of
the stockexchanges will also ensure cost efficiency and improved governance at the stock exchanges.
3. Corporate Debt Market Reforms Development of a corporate debt market has been a top priority area for SECP and a
number of measures have been taken in this regard in the recent past.The rate of stamp duty on the issuance of corporate
bonds and transfer of securitized assets has been reduced.However, difference in the rate of stamp duty amongst
different provinces still exists which needs to be rationalized for the harmonious development of the corporate debt
market. SECP has also abolished the mandatory listing requirement for public offering of corporate bonds to encourage
public offering of corporate bonds with lesser regulatory requirements and lower cost of issuance.The SECP is also
working closely with the stockexchanges and the Mutual Fund Association of Pakistan to provide a regulatory regime
which would facilitate the listing and trading of corporate debt instruments. Work is underway to introduce the concept
of Qualified Institutional Buyers and shelf registration procedures for corporate debt instruments. The SECP has also
issued a circular to obtain data of privately placed TFCs from the issuers for future planning to develop the domestic
corporate debt market
4. Work in Progress The SECP has developed a new risk based Capital Adequacy Regime (CAR) in line with
international best standards and practices for determination of capital adequacy which accurately reflects the risk profile
of an intermediary. Following rules and regulations have been drafted and will be notified after necessary review and due
deliberation by SECP: (1) Balloters and Securities Registrars Rules, (2) Underwriter (Registration and Regulation)
Rules, (3) Bankers to an Issue Regulations, and (4) Debenture Trustee Regulations. The existing Listed Companies (Buy
Back of Shares) Rules, 2001 are being revised and replaced with the regulations which shall allow the listed companies
to retain the repurchased shares as treasury stock. The existing Companies (Issue of Capital) Rules, 1996 are being
revised in order to facilitate the issuers making public offer of shares through the book building process and to remove
the practical difficulties being faced by the issuers while complying with various requirements of these rules. In order to
further broaden the scope of trading activity at the bourses,SECP in collaboration with the Stock Exchanges, is working
on the introduction of new derivative products such as Index Options and Stock Options.
SALIENT FEATURES OF TRADE POLICY 2008-09
During fiscal year 2007-08,the country’s import bill as well as trade deficit reached to a record level. Realizing the
alarming situation during last fiscal year, the government, in line with its obligations under the WTO took the following
measures to curtail the rising trade deficit.
1. L/C margin on import of all non-essentialitems was imposed w.e.f. 22nd May, 2008.
2. Duty on non-essentialand luxury items was raised in the Federal Budget 2008-09.
3. Regulatory Duty ranging from 15-50 Percent imposed on import of 397 consumer items since 27th August,2008.

5. Ministry of Commerce in consultation with stake holders is endeavoring to use the trade policy as an instrument to mitigate the
negative effects of this situation by pursuing the ongoing export led growth strategy more vigorously aims at bridging the trade
gap by focusing on reducing the cost of doing business,enhancing productivity and competitiveness of our manufacturing sector.
The trade policy also focuses on agriculture, as it is an integral source of supply of our major agri-based export products.Major
incentives in the current trade policy are as under:
1. To reduce cost of raw material imports and thereby making export products more competitive, the import of Job lots & Stock
lots of raw material, which attract duty upto 5%, was allowed.
2. To reduce the cost of manufacturing of liquefied gases,import of used cryogenic containers/cylinders by industrial
consumers has been allowed subject to prior NOC from the Department of Explosives and condition that the
containers/cylinders are refurbished prior to shipment, complaint with international safety standards and not older than 10
years.
3. Import of cement bulker semi trailers, without prime movers in used condition and not older than 10 years allowed to cement
manufacturers for transportation ofbulk cement.
4. To make exports more competitive in the international market, import of cheaper raw material machinery sourced from India
allowed by adding another136 items in the Positive List of items importable from India. This also includes diesel and fuel o il
from India that will be cheaper due to lower transportation cost.
5. Stainless steel and cotton yarn are importable from India by train. To further reduce the cost of doing business,theirimport
by trucks through Wagah as well allowed.
6. To facilitate expatriate returning Pakistanis with limited means to create an economic opportunity for themselves as well as
ease the shortage of buses on inter city routes,import of buses not older than 05 years is allowed underthe Transfer of
Residence scheme.
7. To give access to people to cheaper academic, scientific & reference books available in India, their import from India was
allowed while previously only technical professionalbooks could be imported.
8. In compliance with the UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances 1988, import of
Toluene, MEK and PotassiumPermanganate made subject to NOC by the Ministry of Narcotics Control.
9. To prevent unscrupulous elements from selling unrefined palm oil in the market and endangering public health, only
recognized manufacturers allowed to import crude palm oil for further processing and refining. Furthermore, manufacturers
who import palm oil in crude form will not be allowed to sell it to non-manufacturers. However commercial importers who
have invested in large bulk storages will be allowed to continue importing crude palm oil subject to a safeguard mechanism
to be drawn up by FBR.
10. In compliance with the Montreal Protocol, import of CFC gas based refrigerator and freezing equipments was already
banned.To remove any possibility of misuse, import of CFC based compressors also banned.
11. It has been decided that Plant, machinery and equipment imported to setup a unit in Duty and Tax Remission for Exports
(DTRE) scheme will be exempt from duty and taxes, Inputs in DTRE will also be allowed to be imported from India, even if
these are not included in the importable items from India, or manufactured locally, The period of retention of raw material
and components for export undertemporary importation scheme (SRO 1065) may be increased from current 12 months to 18
months i.e. at par with DTRE Scheme.
12. Government’s Commitment of Decision to completely zero-rate the export by refunding whole amount paid as indirect taxes
on inputs used for manufacturing for exports.
13. In view of the hassle involved in getting benefits of Duty and Tax Remission for Exports scheme, decision to introduce new
scheme where by a notified percentage of inputs may be allowed to be imported at zero duties against fob value of exports
with flexibility to import any product among the notified list in any quantity within the overall entitlement of the exporter.
14. In order to attract new investment in pharma sector,it was decided that an incentive for accelerated depreciation allowance @
90.0 percent of the value of capital assets will be allowed in line with the industries undertaking establishment in rural areas.
15. Allowing exporting pharmaceutical companies to send free samples to the extent of 10 percent of the commercial export
quantity in the preceding year.
16. The pharmaceutical sectorallowed retaining up to 15 percent of their export earnings in foreign currency accounts.
17. Gold, silver, platinum, palladium, diamond and precious stones were exempted from levy of customs duties and sales tax.
18. To reduce expenditure on machinery/equipment for mining/quarrying and grinding of minerals will be allowed from India.
19. Mark up support on loans for setting up inhouse effluent treatment plants increased from 6.0 percent to 8.0 percent or 50.0
percent of the mark up.
20. The horticulture sectorbeing declared as an industry.

6. 21. Establishment of a farm to port cool chain as part of National Trade Corridor improvement Program. Till such time that is
implemented to facilitate exporters of horticultural products support for cool chain and cold storages for horticulture will be
increased to 8.0 percent or 50.0 percent of the mark up.
22. Government will bear 50.0 percent of the cost registration of herbal medicinal products abroad i.e., at per with
pharmaceutical products.
23. Mark up support on loans for setting up of slaughterhouse increased from 6.0 percent to 8.0 percent or 50.0 percent of the
mark up.
REFORMS 2009-2010
5.2. Recent Monetary and Credit Developments:
1. Developments in the monetary sectorduring July to April FY10 can be summed up as follows: x A net retirement of bank
credit by the private sector occurred in the first few months of the fiscal year, followed by a fairly strong uptick in subsequent
months. As of third week of April, utilisation of bank credit by the private sectorhad increased to 4.8%, as against 1.6% in
the corresponding period of 2008-09. Part of the subdued increase is accounted for by a sharp rise in provisioning by banks
for non-performing loans, which is deducted from gross lending to arrive at the reported net figure of borrowing.
2. However, the rise in private sectorcredit demand is concentrated in two sectors:textiles and energy. The trend in the
former is in line with improving external demand for yarn, while in the case of the latter, the circular debt issue has
accounted for a large increase in borrowing requirements for the affected companies.
Important Measures Taken at KSE in 2009
1. Introduction of corporate Bonds Automated Trading System.
2. Data Vending and Launch of Mobile KSE Automated Trading System(mKats)
3. Implementation of internationally accepted industry classification Benchmark a jointly developed.
4. Classification systemlaunched by FTSE Group and Dow Jones Index. Capital Markets 173 Risk Management.
5. Introduction of Client Level Margining Regime.
6. Restructuring of Net Capital Balance requirement.
7. Pre‐ settlement mechanism in Ready & Deliverable Future Contract Market.
8. Introduction of Exposure Dropout Facility during Trading Hours.
9. Introduction of Client wise cash deposits allocation against exposure margin and losses.
10. Change in Penalty requirement on Net Capital Balance Certificate.
Capital Market Reforms 2009-2010
1. The focus of the reforms was to improve risk management of the market. The concept of Concentration Margins was
introduced, and amendments pertaining to the implementation of the same in place of special margins on derivative
products,were approved in the Regulations governing Risk Management of the Stock Exchanges.
2. Anotherimportant measure was the phase‐wise implementation of the client‐level margining systemat the stock
exchanges and the NCCPL. The said systemwould assist in eliminating chances of misuse of one client’s margins
against exposure requirements of other clients.
3. The Deliverable Futures Contract Market was relaunched in view of the market need for a derivative product.This
re‐launch was characterized by measures for revamped risk management of the said product.
4. Also, the SECP is facilitating the stockexchanges in exploring avenues for introduction of Index based Market
Halts, which is geared at reducing the risk associated with trading at the stockexchanges by progressively increasing
the circuit breakers on individual scrips thereby allowing the securities a wider range for movement, in line with
international best practices.

7. REFORMS 2010-2011
Capital Market Reforms 2010-2011
1. In order to strengthen the Pakistani capital market and to have improved risk management, increased transparency,
improved investor protection and for the introduction of new products to provide depth to the market, SECP initiated
following measures,
2. In order to cater to the financing needs of the market and to bring in liquidity, the securities (Leveraged Markets and
Pledging) Rules were finalized in coordination with the relevant stakeholders and promulgated on February 18,
2011. Rules provided the broader regulatory cover to the products of Margin Financing, Margin Trading and
Securities Lending and Borrowing. Subsequently,the regulatory framework of the stock exchanges, the National
Clearing Company of Pakistan limited (NCCPL) and the Central Depository Company of Pakistan Limited (CDC)
was also amended to provide for the operational aspects ofthe said mechanisms.
3. Under the “Automation of Securities Settlement Project” at the CDC. Under this s ystem, book entry securities are
automatically transferred from the respective sellers’ account to the respective buyers’account instead of being
routed through the member’s main account.
4. The SECP formulated a comprehensive policy for dealing with companies in default of securities market laws to
protect the investor, enhance transparency and improve member listing.
5. Efforts were made to enhance the product portfolio of the National Commodity Exchange Limited (NCEL), with a
view to catering to the hedging and speculative needs of various target groups.
6. A committee of stakeholders was constituted to give recommendations for promoting activity at the earlier
introduced Bonds Automated Trading System (BATS) for trading of corporate bonds,and for augmenting the said
System with enhanced functionalities to bring it at par with the international systems for corporate debt market.
Measures for development Debt Markets 2010-2011
1. Listing of government debt instruments at the stock exchanges would greatly enrich development of the debt market.
2. At present,the debt securities though listed at the stockexchanges are not actively traded as the Capital Value Tax
(CVT) collection hinders the growth in the secondary market for debt securities which can be lowered.
3. Rationalize the cost of issue of corporate bonds,the rate of stamp duty applicable on issue and transfer of Term
Finance Certificates and Commercial Papers may be reduced further.
4. In order to strengthen the regulatory framework and to develop the rating process in Pakistan, services of an
international consultant were hired by the SECP to provide technical assistance with respect to the operations and
regulations of Credit Rating Agencies.The consultants gave their recommendations, which are being implemented .
Source: SECP 2011
REFORMS 2011-2012
Measures to encourage New Equity Listings:
Various steps are being taken to encourage new listings which include the following:
1. The management of unlisted public companies is being approached through stockexchanges to motivate them for listing
at the stockexchanges. An IPO Summit has been organized to identify potential IPOs and to attract them to list their
companies on the stockexchanges
2. Various regulatory bodies such as PTA, OGRA, DGPC, PPIB, SBP and BOI have been approached so that their
regulatees can be motivated for listing
3. Formation of a technical committee, comprising members from all the three stock exchanges and the commission to take
necessary steps forencouragement of new listing. Such steps include

8. a. revision of the existing regulatory framework for new listing
b. introduction of SME board for listing of small capital based companies and venture companies
c. amendments in the listing regulations for reviewing the minimum allocation of capital to the general public
d. devising a procedure for allocation of capital to various categories of applications during IPOs, and
e. bringing uniformity in the listing regulations of all the three stock exchanges of Pakistan
Measures for the development of debt markets:
1. Review of the existing regulatory framework for CRAs in line with the international best practices
2. Strengthening of the existing regulatory Framework for CRAs viz the credit rating companies rules, 1995 and
the code of conduct for CRAs dated February 17, 2005
3. Review of the proposals of CRAs regarding enhancement of the rating universe
4. Diversification of capital structure of CRAs and their listing on the stock exchanges
5. Regulatory framework for establishment of a Bond Pricing Agency (BPA)
6. In order to rationalize the cost of issue of corporate bonds,steps are being taken to reduce the rate of stamp duty
applicable on issue and transfer of Term Finance certificates (TFCs) and commercial papers.
Future Road Map
In consultation with relevant stakeholders, a comprehensive three-year Capital Market Development Plan (2012-14) has been
drafted. The plan envisages introduction of key structuraland regulatory reforms, development of equity, derivative, debt,
commodities and currencies markets, development of Shariah-compliant investment alternatives, and measures for improving
governance,risk management, efficiency and transparency in capital market operations.Efforts are underway for achieving
the plan’s objectives within timelines provided, most important of which are given below:
1. The Stock exchanges (Corporatization), Demutualization and Integration Bill has been approved in the joint session of
Parliament in March 2012. The bill provides a framework for the corporatization, demutualization and integration of the
stockexchanges. Demutualization would result in enhanced governance and transparency at the stockexchanges and greater
balance between interests of various stakeholders by clear segregation of commercial and regulatory functions and separation
of trading rights and ownership rights. It will also assist in expansion of market outreach, resulting in larger number of
investors,improved liquidity and better price discovery at the stockexchanges. A demutualized stockexchange will be in a
better position to attract international strategic partners and good quality issuers.Demutualization will also facilitate
consolidation of brokers leading to financially strong entities. The SECP, along with the stockexchanges, is in the process of
ensuring that subsequent to the enactment of the law, the activities set out therein are completed in a timely manner.
 In line with international best practices,efforts will be undertaken for NCCPL to function as Central Counter Party;
establishment of a settlement guarantee fund; and transfer of risk management to NCCPL.
2. For developing the commodities market, the SECP may explore the possibility of allowing new commodity exchanges to
function in the country, as presently the potential offered by this market segment is not being utilized to the maximum.
This measure will also facilitate healthy competition and business generation in this segment while contributing towards
greater market outreach to the investors resulting in growth in the size of the commodities market.
3. For developing an Islamic capital market in line with global best practice, the SECP is contemplating the establishment
of a Shariah Board comprising of eminent Islamic scholars and market professionals to ensure that all products/services
offered under this umbrella are in conformity with the Shariah principles. Also, efforts will be made for consideration of
existing Islamic institutions and development of innovative Shariah compliant institutions,products and services in order
to deepen the capital market.
4. Regarding new product/systemdevelopment, the future SECP agenda includes introduction of trading in index option to
provide investors with avenues to develop better investment and hedging strategies.Also, to boost activity in index
futures market, dialogue will be initiated with foreign stock exchanges for cross listings of foreign indices at Pakistani
stockexchanges. For investors in the commodities segment, efforts will be made for introduction of new futures
contracts in commodities like cotton seed,oilcake, crude palm oil and maize, and rolling currency contracts on foreign
currency exchange rate pairs. Also,work is underway for establishment of a collateral management company that would
have a national network of approved warehouses with storage,grading/certification capabilities for commodities market.

9. 5. To accelerate growth in the debt market, endeavors will be made for listing of government debt instrument at the stock
exchanges and integration of National Savings Schemes instruments in to the mainstream capital market, in coordination
with relevant stakeholders including the federal government and the State Bank of Pakistan. Also, to promote
transparency and price discovery of debt securities and minimize pricing issues of debt securities, establishment of an
independent Bond Pricing Agency (BPA) conforming to international standards,is in the pipeline. The BPA is expected
to contribute towards stimulating activity in the primary and secondary debt markets, increasing market depth,reducing
information asymmetry, increasing credibility of financial statements through accurate asset-liability valuation, product
development etc.
REFORMS 2012-2013