Under the Regulatory impetus of Securities & Exchange Commission of Pakistan (SECP), CDC, in collaboration with PSX & NCCPL has launched Pakistan’s first Professional Clearing Member. Around 25 Trading Only Brokers have signed up for the services of the new PCM. By December this year, the new regime will be completely implemented, and all Trading Only Brokers will start using the services of PCM by shifting their clearing, settlement & custody functions to PCM.
The new PCM regime has been successfully implemented after the introduction of relevant regulatory framework by SECP and capital market infrastructure entities, leading to the launch of EClear Services Limited (ESL).
SECP assigned the task of implementing this novel concept in Pakistan to all the three SROs in the Capital Market i.e. CDC, PSX and NCCPL. CDC was assigned to lead the implementation as the Project Manager.
Professional Clearing member (PCM), which is also known internationally as General Clearing Member (GCM), is an international best practice of “Third Party Clearing” service provider whereby an entity, which is normally not a trading member of the Exchange, provides Clearing and & Custodial services to trading members of the Exchange, who either voluntarily or by virtue of Regulatory framework are not acting as Clearing members of the Clearing house.
SECP introduced the new Broker Regime under the Securities Brokers (Licensing & Operations) Regulations in 2020 categorizing securities brokers into three categories namely Trading & Clearing, Trading & Self Clearing and Trading Only. One of the major requirements for the implementation of the new Broker Regime was the introduction of an independent third party Custodial, Clearing & Settlement service provider for the clearing & settlement of trades executed by Trading Only Brokers.
This hi-tech solution will not only bring automation, efficiency, and transparency for our existing market players, but also pave the way for newcomers in our capital market, both as brokerage Service providers and also as investors. This initiative will also expand the investor base of Pakistan Capital market, as it will provide investors with a completely new and digital experience of capital market while giving them the confidence of asset protection by a reliable and independent third-party service provider. Hence, with the implementation of this regime, Pakistan’s capital market is poised to stand at par with the established markets especially in terms of investor protection and ease of doing business.