Framework Overview
The SECP aims to establish a comprehensive regulatory framework for Algorithmic Trading in Pakistan's capital market
The Securities and Exchange Commission of Pakistan (SECP) has proposed a comprehensive regulatory framework for Algorithmic Trading. The core objectives are to harness the benefits of technology while mitigating the associated risks.
Benefits to Harness
- Increased market liquidity
- Enhanced market efficiency
- Improved price discovery
- Reduced transaction costs
- Technological advancement
Risks to Mitigate
- Market manipulation
- Systemic instability
- Flash crashes
- Unfair advantage
- Operational failures
The framework consists of six key pillars designed to create a balanced approach to algorithmic trading regulation:
- Phased and Restricted Introduction: Initially for institutional investors only
- Mandatory Registration and Approval: All entities and algorithms must be registered
- Rigorous Testing and Certification: Multiple testing requirements before deployment
- Strict Risk Management and Controls: Pre-trade and post-trade risk controls
- Market Integrity and Fair-Play Rules: Measures to prevent market abuse
- Governance, Oversight, and Accountability: Clear responsibility assignment