SECP Proposes Regulatory Framework for Algorithmic Trading in Pakistan

The Securities and Exchange Commission of Pakistan (SECP) has released a Concept Paper titled “Regulating Algorithmic Trading in Pakistan”, outlining recommendations based on international best practices. The proposed framework seeks to foster innovation while safeguarding market integrity and investor protection, says a press release issued by SECP on Friday. The global rise of algorithmic trading, besides offering numerous advantages in speed and efficiency, also presents a set of new challenges. To address these, the SECP’s framework proposes clearly defined roles for key stakeholders. Exchanges will oversee registration, testing, and the assignment of unique identifiers for algorithmic traders. Brokers must implement strong control mechanisms, comply with audit and governance requirements, and ensure rigorous oversight of their algorithmic trading activities. Meanwhile, third-party algorithm providers will be required to adhere to applicable laws and regulatory standards. Recognizing that Pakistan is in the early stages of regulating algorithmic trading, the SECP recommends a phased implementation approach. Initially, access will be limited to institutional investors, with potential expansion to retail investors in later phases, contingent upon market readiness, risk assessment, and accumulated experience. The Concept Paper is now available for public feedback on the SECP’s website.