The Pakistan Stock Exchange (PSX) has taken a significant step forward by introducing new futures eligibility requirements in conjunction with the launch of 90-day maturity Deliverable Futures Contracts (DFC) on 26 July 2021.
There will be no segmentation of the A and B categories under the new criteria, and stocks will be chosen solely on quantitative parameters that reflect true liquidity. If certain conditions are met, Exchange-Traded Funds (ETFs) will also be eligible. However, companies who have obtained a court order restraining the Commission from conducting any inquiry/investigation will be ineligible. Deliverable Futures and Cash Settled Futures Markets will be open to all qualifying firms and ETFs.
PSX notified the public of the new criteria and the eligible futures list via notification number. PSX/N-740 dated 17 June 2021:
Mr. Farrukh H. Khan, the MD PSX, commented on the debut of the 90-day DFC regime and new futures eligibility requirements, saying, “The launch of the international standard 90-day DFC is a positive development for the Stock Exchange and all capital market stakeholders.” Each month, the 90-day DFC market will open with three distinct maturities (current month expiration, next month expiration, and last month expiration) at the start of each contract month. Additionally, it eliminates the requirement for a mandated one-week roll-over period, as investors can roll over their current positions at any time prior to expiry, depending on liquidity, reducing some of the roll-over week pressure. The new selection criteria are dynamic and adapt to changing market conditions. More corporations can now trade on the futures exchange. According to the most recent informed list, 84 firms and one ETF are qualified for futures trading.
Khan continued, “We appreciate the SECP’s cooperation in this matter, which approved the 90-day DFC regime and new futures eligibility criteria.” This is intended to enhance volumes and liquidity, hence increasing the market’s depth”.
The PSX is constantly working to improve and develop its products for the benefit of its stakeholders and market players. Additionally, it intends to expand its product line and bring additional new goods in the future.
With the introduction of the 90-day DFC and the introduction of new futures eligibility criteria, the PSX Future Contract offers have been brought into line with those of international markets. This move is part of the PSX’s efforts to increase liquidity in the Futures market by providing investors with a broader selection of assets and contracts with different expirations.