SECP Working on New Plan to Revive PSX-Based ETF Market for Investors

The Securities and Exchange Commission of Pakistan (SECP) has granted in-principle approval for a comprehensive reform roadmap aimed at developing the Exchange Traded Fund (ETF) market in Pakistan by improving liquidity, expanding investor access, and reducing overall investment costs.

The reforms will be implemented in phases according to a defined timeline and have been developed after extensive consultations with key stakeholders, including the Pakistan Stock Exchange (PSX), National Clearing Company of Pakistan Limited (NCCPL), Central Depository Company (CDC), Mutual Funds Association of Pakistan (MUFAP), securities brokers, and asset management companies (AMCs).

Under the new framework, AMCs will be allowed to directly offer ETFs as part of their product portfolio, expanding access beyond the current exchange-only model where investors primarily depend on securities brokers. AMCs will also be enabled to assist investors in opening brokerage accounts directly, allowing ETF investments through AMC platforms without requiring broker-mediated order placement. This is expected to improve investor convenience and increase market participation.

To streamline costs and improve distribution, the framework introduces a revenue-sharing model under which AMCs may share a portion of their ETF management fees with securities brokers for distribution services. This is intended to align incentives among market participants and widen the ETF investor base.

The reform plan also proposes allowing securities brokers to play a more active role in the ETF ecosystem, including the possibility of launching and managing ETFs. Currently, ETFs are primarily issued and managed by AMCs, but the new structure aims to reduce layered processes and enhance market depth and product variety.

In addition, the roadmap recommends including passive investment products such as index tracker funds and ETFs within the Voluntary Pension System (VPS). This will provide investors with lower-cost exposure to capital markets compared to traditional equity-based pension fund options.

Complementary measures will also support implementation, including digital onboarding through multiple platforms, investor awareness initiatives, and operational upgrades across market infrastructure. Regulatory instructions will be issued to relevant institutions to begin system enhancements and compliance adjustments.

SECP stated that the reforms are designed to strengthen Pakistan’s capital markets by promoting transparent, efficient, and cost-effective investment products for both retail and institutional investors. The expansion of the ETF market is expected to deepen market liquidity and broaden participation in the capital market.