In a major move forward, the Pakistan Stock Exchange (PSX) has introduced a new futures eligibility criteria communicating the launch of the 90-day maturity Deliverable Futures Contracts (DFC) with effect from DFC August 2021 which will start from 26 July 2021.
As per the new criteria, there will be no segregation of the A and B categorization, and stocks will be selected based on quantitative factors that measure real liquidity. The Exchange-Traded Funds (ETF) will also be eligible if certain conditions are met. However, the companies that have obtained a stay order from the court against any inquiry/investigation initiated by the Commission will not be eligible. All the eligible companies and ETFs will be eligible for trade on Deliverable Futures and Cash Settled Futures Markets.
The new criteria and the eligible futures list have been notified by PSX through notice no. PSX/N-740 dated 17 June 2021:
On the launch of the 90-day DFC regime and new futures eligibility criteria, Mr. Farrukh H. Khan, the MD PSX, said, Launch of the international standard 90 days DFC is a positive development for the Stock Exchange and for all stakeholders of the capital market. 90 day DFC shall open each month such that the market shall have three different maturities (current month expiry, next month expiry and last month expiry) at the start of each contract month. In addition to this, it will also eliminate the need for a mandatory one week roll-over period as investors can roll-over their existing positions any time before expiry, depending upon the liquidity, hence, alleviating the roll-over week pressure to some extent. The new selection parameters are dynamic and can adopt to any market situation. More companies are now eligible to trade on the futures counter. Based on the recent notified list, 84 companies and 1 ETF are futures eligible.
Khan further stated, “We appreciate the cooperation extended to us by the SECP in this regard, whereby it approved the 90-day DFC regime and new futures eligibility criteria. This is expected to increase volumes and liquidity, and hence improve the depth of the market”.
The PSX is continuously striving to introduce better and enhanced products for its stakeholders and market participants. It also aspires to increase its product offerings and introduce more innovative products in the future.
With the launch of the 90 day DFC and the new futures eligibility criteria, the PSX Future Contract offerings are now in line with international market offerings. This move is part of the PSX’s efforts to enhance liquidity in the Futures market, with more options available for investors in terms of the securities and contracts of multiple expiries.