PSX is set to make new trading platform

The Pakistan Stock Exchange (PSX) is all set to make a newly acquired trading platform fully operational over the next couple of months to strengthen security features to better safeguard investors’ data and integrate the national bourse with regional and international stock markets.

The new trading system, which is bought from Shenzhen Stock Exchange (SZSE) for $2.85 million, has a built-in surveillance system, which means it is capable of preventing and detecting data leakages and theft attempts. The integration would help attracting foreign investment at PSX.

“We are set to make the new trading system fully operational by mid of this year (June-July 2021),” PSX CEO Farrukh H Khan said while talking to The Express Tribune. “The new trading system has entered into final testing phase. We have been holding mock trading sessions over the new system for the past six months. The mock sessions have helped in detecting and removing technical issues in the new system.”

“The new system works at a high speed that it concludes trading session (the full-session calculations and compilation of trading data at the end of the session) in just 30 seconds or in less than one minute…compared to 30 minutes that are required in the system in place (KATS/Karachi Automated Trading System) at present,” he said.

Khan said the stock market may consider increasing trading hours by 30 minutes per session to be saved with the help of the new system. “The increase in trading hours would definitely help increasing trade volumes in daily sessions,” he said. He said the new trading system carries a built-in surveillance system which the existing trading platform KATS lacks. “The stock market does surveillance manually through acquiring data from KATS,” he said.

He said the new system would automatically address complaints about investors’ data leakages and theft as to which investors bought which shares at what prices.

To recall, some of the stockbrokers have alleged that officials time and again in the past copied and sold the data on a daily basis to other stockbrokers and investors. The apex regulatory authorities including the Securities and Exchange Commission of Pakistan and PSX have conducted a couple of studies to check the data leakages and complaints.

The new system would fully replace KATS which has remained in operations since 1997. “We have kept updating KATS as and when needed from time to time. PSX was made operational through remote working (work from home) through KATS throughout the Covid-19 pandemic, as we did not close the market for a single day. The system, however, has become outdated and needs to be replaced now,” he said.

The new system was originally aimed to be made fully functional by the first quarter (Jan-Mar) of 2021. However, the Covid-19 pandemic slowed down the process of the deployment.

The PSX CEO said they were considering introducing new products to increase trade activities at the local bourse. In the near past, the market has launched Exchange-Traded Funds (ETFs) and listed debt securities to provide new investment opportunities to investors.

Briefing media about acquisition of the new trading system, the then PSX chairman Sulaiman S Mehdi said, a couple of months before the Covid-19 outbreak in Pakistan in February 2020, that the new system would connect the PSX with three Chinese international stock markets including the SZSE, Shanghai and Hong Kong exchanges. The linkage will allow cross-listing of companies and attract foreign investment in each other’s stocks.

Earlier, a Chinese consortium acquired a 40% stake in the PSX - the company running the stock trading platform - at Rs28 per share in January 2017. Shanghai Stock Exchange and Shenzhen Stock Exchange are part of the consortium.

PSX had shortlisted two global stock markets for buying the new trading and surveillance system, including the London Stock Exchange.

The offer and terms and conditions of the SZSE were found suitable for the PSX. “PSX will pay the price ($2.85 million) in instalments over a period of five years. Moreover, it will be a one-time cost rather than paying the system licence renewal fee every year,” Mehdi said.

SZSE is the third largest stock market in the world in terms of trading value. The new trading system will bring the PSX on a par with international stock exchanges.

“The new system will open up Asian markets to the PSX and Pakistan for business opportunities,” he said. The Pakistan Stock Exchange’s (PSX) benchmark KSE 100 Index increased 2.5%, or around 1,100 points, in the prior three working days (May 3-6) and closed at 45,175 points on Thursday (May 6).

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