SBP discloses end-of-day rates method for foreign exchange firms

• SBP says new method to ensure more transparent interest rate.
• 8 companies must participate in data submission: SBP.
• “ECAP will assign responsibility for data collection.”

KARACHI: In a bid to ensure transparency, the State Bank of Pakistan (SBP) has asked exchange firms to adopt the new mechanism for calculating and publishing end-of-day exchange rates for six major currencies from December 26. The news reported on Saturday.

In a letter to the Exchange Companies Association of Pakistan (ECAP), the central bank said the new method will ensure a more representative and transparent rate for the open market.

Under the new protocol, exchanges holding at least 75% market share will have to provide daily bid and ask prices for the US dollar, euro, pound sterling, Japanese yen, UAE dirham and Saudi riyal Arabic to ECAP, which will then calculate and propagate the average rates.

At least eight exchanges must participate in the submission of buy and sell data, which will be done through a dedicated email channel between 4:00 pm and 4:30 pm, the letter said.

Exchange companies that do not provide rates for five working days in a month should explain the reason to SBP through ECAP, he added. SBP reserves the right to appoint a replacement exchange company in case of suspension or cancellation of the license of a contributing exchange company, based on market share allocation.

ECAP will calculate simple average bid and ask prices for each currency from the submitted data and disseminate these rates to interested parties by 5 p.m. after training.

ECAP will delegate responsibility for data collection, calculation and dissemination to its office operators and ensure that no other exchange company publishes end-of-day rates under its name, the letter said.

All FX firms will use the average of ECAP’s published end-of-day rates for revaluation purposes, including regulatory exposure calculations.

The letter also emphasized that ECAP will be responsible for ensuring the accuracy of data distributed to the public.