KARACHI: In a major move forward, Pakistan Stock Exchange (PSX) has introduced a new futures eligibility criterion and communicated the launch of the 90-day maturity Deliverable Futures Contracts (DFC) with effect from DFC August 2021 which shall start from July 26, 2021.
As per the new criteria, there shall be no segregation of A, B categorization, stocks shall be selected based on such quantitative factors that measure real liquidity. Exchange Traded Funds (ETF) shall also be eligible if certain conditions are met. However, such companies that have obtained stay order from court against any inquiry/investigation initiated by the Commission shall not be eligible. All eligible companies and ETFs shall be eligible for trade on Deliverable Futures and Cash Settled Futures Markets.
The new criteria along with eligible futures list is notified by PSX through notice no. PSX/N-740 dated June 17, 2021
On the launch of 90-day DFC regime and new futures eligibility criteria, Farrukh H. Khan, the MD PSX, said, “Launch of the international standard 90 day DFC is a positive development for the Stock Exchange and for all stakeholders of the capital market.”
Farrukh Khan said that 90 day DFC shall open each month such that the market shall have three different maturites (current month expiry, next month expiry and last month expiry) at the start of each contract month. In addition to this, it will also eliminate the need for a mandatory one week roll-over period as investors can roll-over their existing positions any time before expiry, depending upon the liquidity, hence, alleviating the roll-over week pressure to some extent.
He further said, “the new selection parameters are dynamic and can adopt to any market situation. More companies are now eligible to trade on the futures counter. Based on the recent notified list, 84 companies and 1 ETF are futures eligible”. He further stated, “We appreciate the cooperation extended to us by the SECP in this regard whereby it approved the 90-day DFC regime and new futures eligibility criteria. This is expected to increase volumes and liquidity, and hence improve the depth of the market.”
Pakistan Stock Exchange is continuously striving to introduce better and enhanced products for its stakeholders and market participants. PSX aspires to increase its product offerings and introduce more innovative products in the future. With the launch of the 90 day DFC and the new futures eligibility criteria, PSX Future Contract offerings are now in line with international market offerings. This move is part of the efforts of PSX to enhance liquidity in the Futures market, with more options available for investors in terms of securities and contracts of multiple expiries.