A balancing act?

THE Securities and Exchange Commission of Pakistan has decided to go back to the same lower and upper locks that our bourses were subject to before June 23. The Commission, which regulates the country's stock markets and financial institutions, has imposed the more strict locks as a market cooling measure. The market was getting a little too hot, susceptible to a possible meltdown. They were probably more or less successful in achieving that end. But the measures came with their own price in terms of falling market trading volumes. The previous locks were, therefore, reverted back to. This was but natural. The point is not to regulate to the extent of stifling commercial activity. This is the trade-off that exists in capital markets the world over, as indeed in all aspects of general governance itself: the impulse to control in order to avoid accidents should be balanced with cutting everybody some slack. Without freedom, no great value addition, whether it is wealth in stock exchanges, or knowledge in universities, can be achieved. It would appear the SECP has just completed another episode in this balancing act. But the way the balancing act is carried out ruffles many feathers. The SECP cannot summarily issue orders to change the values of the circuit breakers. Or any other step for that matter. Though it is true that the steps were necessary (even though there might be dissenting views on this) there should be, if not a consensus (the market players should not be spoilt), then ample information much beforehand to everybody. An asymmetrical distribution of knowledge in markets like these can easily net a lot of money to the few in the know. The Pakistani financial capital markets are still not doing quite what they should be: acting as a source of capital to concerns involving real productivity. In other words, they are not feeding into the real economy and are more speculatory instead. That state of affairs can change only with more transparency and stability in the regulation of our bourses.

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