Opting for a healthier PSX

The Securities (Leveraged and Pledging) Rules have significantly impacted the Pakistani capital markets, albeit not in a positive way. These rules allow stock exchanges, central depositary companies and clearing companies to act as authorised intermediaries for leverage products, such as margin trading and margin financing system. This article recommends removing these frontline regulators from the list of authorised intermediaries and letting a consortium of banks operate these products. These rules have been perceived as a window of opportunity for continuing Badla with new variants, names, or brands. Badla, which refers to margin financing or margin trading, has been discontinued globally after introducing derivatives such as options and cash-settled futures. This shift away from Badla has proven to be beneficial for other markets, as seen in the case of India, where the introduction of options and cash-settled futures led to the rerating of the Indian capital market and turned it into the largest derivatives equity-trading market in the world.