Daily Times

KARACHI: The Pakistan Stock Exchange (PSX) has decided to introduce the Single Stock Options from third quarter of 2017 while the website of the exchange will be available in Chinese and Urdu languages as well.

A stock option is a privilege, sold by one party to another that gives the buyer the right, but not the obligation, to buy or sell a stock at an agreed-upon price within a certain period of time.

“With the launch of Single Stock Options, it is expected that ready market volume shall increase by two to three times as derivative volumes in India were at-least five times higher within 2 years launch of derivatives”, said PSX.

Meanwhile, in order to cater to an anticipated influx of new investors, PSX has embarked upon an initiative to revamp its website whereby it is expected that there will be a wider website target audience because locals as well as Chinese investors will now be accessing PSX website which requires the PSX website to be made available in Urdu, English, as well as Chinese. It is expected that with the new outlook and multilingual interface, the existing website advertisement related revenues shall increase by 10 times, added the PSX board.

The PSX said options are globally popular derivative products which provide various benefits that help to create orderly, efficient, and liquid markets, and gives flexibility, leverage and risk minimization to the investors.

In order to add depth to the market and to allow investors to leverage positions for large diversified portfolios, the management of the PSX, in line with international best practices, has embarked upon a process to introduce the Single Stock Options starting from third quarter 2017. The PSX will seek to provide competitive, liquid, and orderly markets for the purchase and sale of standardized options. All option contracts traded on the PSX are proposed to be issued and cleared by the National Clearing Company of Pakistan Limited (NCCPL).

Options are to be traded on the PSX and like trading in stocks; options trading will be regulated by the Securities and Exchange Commission of Pakistan (SECP). Presently, the Regulations Governing Index Options are approved by the SECP, and as such the application software is also ready for deployment and launch of index options, but considering the sentiment of the market participants, PSX is first working to bring depth in Single Stock Futures followed by the introduction of Single Stock Options.

The divestment of a major stake in the Exchange is likely to pave way for introduction of new products, systems, technology, expertise and investors for development of local capital market.

In the years 2015-16, the exchange operations together with related assets and human resources of then existing Lahore Stock Exchange Limited and Islamabad Stock Exchange Limited were integrated into KSE and the Exchange emerged as a single national stock exchange under its present name. Traditionally, stock exchanges were mostly owned by the respective brokers but recently, 40% equity stake of PSX, together with management control, was divested to a consortium comprising of three (3) Chinese exchanges and two (2) local financial institutions.

The bidding for PSX’s 40% equity stake by local and international investors took place on December 22, 2016. Based on the results of the bidding process, the Chinese Consortium submitted the highest bid of Rs 28/- per share. The said Consortium comprises of three Chinese Exchanges, i.e. China Financial Futures Exchange Company Limited, Shanghai Stock Exchange, Shenzhen Stock Exchange and two local Financial Institutions, i.e. Pak-China Investment Company Limited and Habib Bank Limited.