CDC Launches Pakistan’s First-ever Professional Clearing Member with PSX and NCCPL

The Central Depository Company has launched Pakistan’s first Professional Clearing Member in collaboration with the Pakistan Stock Exchange and the National Clearing Company of Pakistan Limited under the Regulatory Impetus of the Securities & Exchange Commission of Pakistan.

Around 25 Trading Only Brokers have signed up for the services of the new Professional Clearing Member (PCM). The new regime will be completely implemented by December and all the Trading Only Brokers will start using the PCM’s services by shifting their clearing, settlement, and custody functions to the PCM.

The new PCM regime has been successfully implemented after the introduction of a relevant regulatory framework by the Securities & Exchange Commission of Pakistan (SECP) and capital market infrastructure entities, leading to the launch of EClear Services Limited (ESL).

The SECP had tasked all the three SROs (the CDC, the PSX, and the NCCPL) in the Capital Market with implementing this novel concept in Pakistan, and the CDC was assigned with leading the implementation as Project Manager.

Also known internationally as the General Clearing Member (GCM), the PCM is an international best practice of ‘Third Party Clearing’ service provider whereby an entity (normally not a trading member of the Exchange), provides clearing and custodial services to the trading members of the Exchange, who either voluntarily or by virtue of the Regulatory framework do not act as Clearing Members of the Clearinghouse.

The SECP introduced the new Broker Regime under the Securities Brokers (Licensing & Operations) Regulations in 2020 to categorize securities brokers into three categories: Trading & Clearing, Trading & Self Clearing, and Trading Only. One of the major requirements for the implementation of the new Broker Regime was the introduction of an independent third party Custodial, Clearing & Settlement service provider for the clearing and settlement of the trades executed by Trading Only Brokers.

This hi-tech solution will bring automation, efficiency, and transparency for the existing market players and will pave the way for newcomers in Pakistan’s capital market as brokerage service providers and investors.

This initiative will also expand the investor base of the Pakistan capital market as it will provide investors with a completely new and digital experience of the capital market while giving them the confidence of asset protection by a reliable and independent third-party service provider. Hence, with the implementation of this regime, Pakistan’s capital market is poised to stand on par with the established markets, particularly in terms of investor protection and ease of doing business.

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