The Pakistan Stock Exchange (PSX) has introduced an ‘online broker only’ category inviting all entrepreneurs, including start-ups and fintechs, to apply for low-cost trading rights and licensing.
The settlement of trades through the online broker will only be done by an e-clearing company as the new class of brokers will end the physical interaction.
In a notification on Wednesday, the PSX said that only the online broker (which is a sub-category of trading) had been listed as a digital platform for traders.
In this category, customer onboarding process and broker transaction services will be provided through online channels only. In addition, “lower financial resource requirements and entry costs make it an ideal choice for those looking for a cost-effective way to offer brokerage services.”
“PSX is committed to supporting innovation in the securities market in view of the growing demand for digital/online investment platforms,” the exchange said.
He added that the Internet-only license meant low financial requirements and operational costs without the need for a physical office. With this license, the broker may execute transactions in ready or futures markets only through electronic means that provide customer onboarding, trade execution, and support services with minimal overhead.
“Whether you are digitally savvy or have a financial background, providing brokerage services has never been more simplified than this.”
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PSX clarified that the online broker would not be allowed to do proprietary trading, meaning they would not be able to trade their own shares.
It is essential for online traders to maintain adequate system infrastructure, including a functional website, internal control procedures and technology to facilitate Internet-based trading services (IBTS) in an effective, efficient and robust manner, PSX said. The license can be obtained by paying a fee of Rs 50,000 to the Securities and Exchange Commission of Pakistan (SECP). They will also have to pay an annual renewal fee of Rs 25,000.
Online brokers must maintain a minimum net worth of Rs 7.5 million. Basic Minimum Capital Requirement (BMC) is Rs 1 million (to be deposited with PSX and maintained at all times).
Some conventional brokers, however, have expressed their displeasure at the introduction of online traders, claiming it is a violation of the 2012 demutualization law and that their high-net-worth clients, such as mutual funds and financial institutions, who were big investors on the PSX, can to open their own trading companies.
Citing a comparison, they said a conventional broker got trading rights for Rs 2.5 million compared to the sole online broker who would get rights for only Rs 50,000. They pointed out that although the new traders could not trade their own stocks, they could trade for their sponsors like company owners.
In addition, PSX has introduced a WhatsApp service to make available a range of information such as market report, summary, daily deals and announcements.
Published in The Express Tribune, November 9u2023.
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