ISLAMABAD - The Securities and Exchange Commission of Pakistan (SECP) has approved certain measures, as proposed by the Pakistan Stock Exchange Limited (PSX), National Clearing Company of Pakistan Limited, international broker dealers and local market participants, for a seamless transition.

The MSCI reclassified Pakistan as an Emerging Market (EM) on June 14, 2016, which was to take effect from June 1, 2017. The rebalancing of portfolios by funds tracking MSCI EM Index and MSCI Frontier Index is expected to result in a significant flux of capital in the stock market on the eve of June 1.

Considering the experiences of other regional markets, which underwent such reclassification in recent years, the SECP as part of its mandate to ensure orderly and efficiently functioning capital markets has approved certain measures for a seamless transition. It has been ensured that minimal changes are made to the system while the trade cycle continues smoothly.

Among other matters, a post-close trading session has been introduced wherein trading will only be allowed at the closing price determined during the closing session of the market. This will allow investors to execute trades through market on close orders. Additionally, it is expected that certain investors might prefer placing their orders at or near the closing time during the normal trading session so that their orders are filled as near to the official closing price as possible to reduce their tracking error.

Thus in order to cater for the expected high volume during the closing session, the closing price for all shares shall be determined over the last two hours of the regular market session on the basis of volume weighted average price (VWAP) as against the current practice of last 30 minutes. This change will only be for a limited period, ie from May 26 to June 2, 2017. The respective indexes of PSX shall accordingly be calculated based on the closing prices under the revised arrangement for the said duration and revert to the current practice thereafter.

In order to further facilitate settlement of trades in the market, the State Bank of Pakistan has extended the timings for the real time gross settlement systems until 3:30 pm during the first week of Ramazan.