Pakistan establishes Shariah-compliant brokerage segment

The Securities and Exchange Commission of Pakistan (SECP) says 33 brokerage houses are now operating dedicated Shariah-compliant windows, collectively representing around 52% of total traded volume at the Pakistan Stock Exchange (PSX). 

In addition, two other dedicated brokers are offering a complete range of Islamic brokerage services.

Under the new framework, Islamic brokerage operations must keep client funds separate and comply with defined Sharia governance requirements.

According to the SECPInvestors will be able to directly access Sharia-compliant shares, Sukuk and Islamic exchange-traded funds (ETFs) through dedicated brokerage window services.

Funds will be maintained through Islamic banking channels, while trading will be limited to securities screened and approved as Shariah-compliant.

Islamic brokers and dedicated windows will not provide interest-based financing or allow non-Sharia-compliant leveraged and speculative transactions.

The initiative significantly expands investment opportunities for investors seeking Riba-free options.

The SECP said 308 of 535 listed securities are Shariah-compliant, representing around 65 percent of PSX’s market capitalization, reflecting the growing demand and significant potential for Riba-free investment.

The regulator said the expansion of dedicated Islamic brokerage services could attract new investors to the capital market and provide investors with a broad universe of Islamic investment opportunities.

The framework was introduced through amendments to the Securities Brokers (Licensing and Operations) Regulations, 2016. It allows brokerage firms to provide Islamic financial services through dedicated windows, separate subsidiaries or by fully converting their operations to Sharia-compliant models.

The framework also requires appropriate Shariah oversight and compliance with applicable PSX, CDC and NCCPL requirements.

SECP Chairman Dr Kabir Ahmed Sidhu described the development as an important step towards the government’s goal of establishing a Riba-free economy.