The Securities and Exchange Commission of Pakistan (SECP) and the Pakistan Stock Exchange (PSX) informed the Sindh High Court that a case filed against the making of regulations was not maintainable since they were not obligated to request public input on criteria.
They also claimed that all PSX regulations were statutory, formulated under the Securities Act of 2015, and revised from time to time. Therefore, they bound the petitioner and all listed businesses.
The Pakistan Stock Brokers Association had filed a complaint with the SHC against the PSX and the SECP, challenging a portion of the futures eligibility criteria for selecting securities eligible for trading, which stated that protection of companies that did not meet the following conditions was ineligible: “No investigation/inquiry has been completed against the company with adverse findings.”
On July 15, a division bench of the SHC ordered that a minor portion of the criteria for selecting assets suitable for trading in the deliverable futures contract and cash-settled futures contract markets would be ineffective until the next hearing.
When the case was heard by a two-judge bench led by Justice Mohammad Shafi Siddiqui, both respondents filed remarks, copies of which were given to the petitioner’s lawyer, who requested time to file a counter-affidavit.
The hearing was postponed until after the summer vacation, according to the court., and instructed the petitioner’s lawyer to prepare a response to the respondents’ arguments before the next hearing. The prior interim stay order, however, will be extended until the next hearing.
The PSX and SECP also stated that the futures eligibility criteria were not part of the regulations in their comments. But instead, as provided in clause 2.4 of the PSX regulation. Hence, they were not subject to public comment.
The PSX claimed that they listed more than 500 assets; however, the PSX has established eligibility requirements for only permitting liquid stocks to be traded on futures contracts that have not been found to have been mismanaged during the review period.
According to the company, the conditions in issue are in place to eliminate any danger of settlement default if substantially fewer liquid companies with negative findings are allowed to trade on futures exchanges.
According to the SECP, the petitioner went to the SHC at Hascol and Unity Foods’ request since their affairs were being probed by it.
It also claimed that had changed the eligibility criteria in the public interest to ensure that companies under investigation/investigation were not only eligible to participate in a riskier segment of the market, such as futures, where contract duration was much longer than the regular counter/ready segment and thus subject to additional risk.
The SECP also claimed that until they lifted the stay on the investigation/inquiry, investors would be incapable of making a well-informed judgment about investing in a riskier segment of the market and that allowing such companies to trade in the futures market would increase market risk due to the uncertainty surrounding their operations and jeopardize public interest.
These businesses, however, would continue to be available for trading on the standard counter, according to the statement.
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