The Securities and Exchange Commission of Pakistan (SECP) has enforced stringent conditions concerning the handling of money and assets belonging to futures brokers and their customers on the “futures exchange.”
On Wednesday, the SECP introduced amendments to the Futures Exchanges (Licensing and Operations) Regulations 2017 via S.R.O. 1913 (I)/2022.
Designated Bank Accounts for Deposits
According to the revised regulations, the futures exchange is required to establish one or more designated bank accounts with a scheduled bank in Pakistan. These accounts are intended for the deposit of money belonging to futures brokers and their customers, in a manner specified by the futures exchange.
Prohibition on Misuse of Assets
Under the amended regulations, the futures exchange is strictly prohibited from utilizing assets that belong to futures brokers and their customers for any purpose other than what is permitted by the law.
Segregation of Assets
Furthermore, the futures exchange must ensure that the assets belonging to futures brokers or their customers are kept entirely separate from the assets of the futures exchange itself. Comprehensive records of all amounts deposited into and withdrawn from the designated bank accounts on behalf of each futures broker and customer must be maintained.
Balances Record Keeping
The futures exchange is also mandated to maintain accurate records of the balances held for each futures broker and customer. These records should include the respective names and amounts associated with each.
Profit Distribution
In the event that unutilized funds of futures brokers or their customers are held in a profit-bearing bank account, any profit earned on these funds must be passed on to the futures broker and their customers in proportion to their unutilized balance. The only exception to this rule is if there is written authorization by the futures broker or customer specifying otherwise. Additionally, after contributing to the settlement guarantee fund at the approved rate by the Commission and deducting a service fee at the maximum rate approved by the Commission, the distribution of profit should be made.
Gradual Phase-Out
Regarding the utilization of profits on unutilized funds of futures brokers or their customers, if the futures exchange is currently using any portion of these profits for purposes not permitted, they must gradually phase-out this utilization in equal proportion by June 30, 2025, as per the SECP’s revised regulations.
