SECP makes three categories of stock brokers through SRO

The securities brokers will have to register with the SECP in new categories by April 15, 2020. Securities broker shall comply with the financial resource requirement of the respective category till June 30, 2020

KARACHI: The Securities and Exchange Commission of Pakistan (SECP), exercising its power, has made three categories of the stock brokers as Trading Only, Trading and Self-Clearing and Trading and Clearing.

Through an SRO 26 (I) 2020, The SECP has directed all the brokers to submit application to the SECP to choose one of the category. The securities brokers will have to register with the SECP in new categories by April 15, 2020. Securities broker shall comply with the financial resource requirement of the respective category till June 30, 2020, the SRO added.

The SRO said, “The following draft amendments to the Securities Brokers (Licensing and Operations) Regulations, 2016, proposed to be made by the Securities and Exchange Commission of Pakistan, in exercise of powers conferred by section 169 of the Securities Act, 2015 (III of 2015) and section 114 of the Futures Market Act, 2016 (XIV of 2016), are hereby published for the information of all persons likely to be affected thereby and, as required by subsection (4) of the said section 169 and subsection (4) of the said section 114, notice is hereby given that objections or suggestions thereon, if any, may be sent to the Commission within fourteen days of placement of draft amendments on the website of the Commission, namely:-

In the aforesaid Regulations, –

(1) After regulation 5, the following new regulation 5A shall be inserted, namely: –

“5A. Categorization of securities brokers.- (1) The application for licence under these regulations may be made for any one of the following categories of securities brokers –

(a) “Trading Only” category shall mean that a securities broker can only execute its proprietary trades and trades on behalf of its customers but cannot settle executed trades or keep custody of securities or money owned by it and its customers.

(b) “Trading and Self-Clearing” category shall mean that a securities broker can execute as well as settle its proprietary trades and trades executed on behalf of its customers and can keep custody of securities and money owned by it and its customers subject to such conditions as may be imposed by the Commission.

(c) “Trading and Clearing” category shall mean that a securities broker can execute as well as settle its proprietary trades and trades executed on behalf of its customers and can keep custody of securities and cash owned by it and its customers subject to such conditions as imposed by the Commission and, in addition, such securities broker can settle trades of other securities brokers and their customers and keep custody of the securities and cash owned by such other securities brokers and their customers.

(2) Securities brokers already licensed under these regulations shall be required to convert to any one of the categories mentioned in sub-regulation (1) through submitting an application for conversion to a specific category on or before April 15, 2020 along with an affidavit that securities broker shall comply with the financial resource requirement of the respective category till June 30, 2020, the notification said.

Provided that from the date of application under sub-regulation (2) any securities broker which has applied for the Trading Only category shall not open accounts of any new customers till the time it transfers its clearing, settlement and custody functions within a transition period as specified under sub-regulation (3).

(3) A securities broker licensed under these regulations, which does not comply with financial resource requirements for Trading and Self-Clearing category specified under these regulations, shall apply for conversion to “Trading Only” category by April 15, 2020, subject to compliance with financial resource requirements of the respective category, and shall be required to transfer its clearing, settlement and custody functions till August 31, 2020 or such extended date as may be specified by the Commission, the notification added.

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