Algorithmic Trading Regulatory Framework

Securities and Exchange Commission of Pakistan (SECP) Concept Paper

Key Proposals

The SECP aims to establish a comprehensive regulatory framework for Algorithmic Trading

Phased Introduction

Cautious approach to implementation

Initially permitted for institutional investors only, with a phased approach before considering retail investors.

Registration & Approval

Mandatory process for all entities

All entities must register with and get prior approval from the Exchange (PSX), with unique identification codes.

Testing & Certification

Rigorous validation requirements

Initial conformance tests, stress testing, and periodic testing to ensure algorithms function correctly.

Risk Management

Strict controls for brokers

Pre-trade controls, kill switch functionality, and post-trade monitoring to prevent market disruption.

Market Integrity

Fair-play rules for all participants

Order-to-Trade Ratio limits, trading time restrictions, and prohibition of market abuse strategies.

Governance & Oversight

Accountability framework

Senior management responsibility, system audits, and clear Service Level Agreements between all parties.

The SECP welcomes constructive feedback on the proposed framework