Implementation of Proposed Margin Trading System in Pakistani Stock Markets: An Exploratory Study
IMPLEMENTATION OF PROPOSED MARGIN TRADING SYSTEM IN PAKISTANI STOCK MARKETS:
AN EXPLORATORY STUDY
Col. Zaigham Khan
Scholar MS- Management
Riphah International University, Islamabad, Pakistan
Hammad Sultan
Scholar MS- Management
Riphah International University, Islamabad, Pakistan
Farrukh Saleem
Scholar MS- Management
Riphah International University, Islamabad, Pakistan
ABSTRACT
Due to adverse law and order situation, Pakistani Stock Exchanges have been turbulent which resulted in depletion of domestic and foreign investments. Introduction of various liquidity products, like; Carryover Trade and Continuous Funding System, failed to develop business friendly environment and diminished in the process. Currently due to the absence of any liquidity product the investors feel deprived of the margin and flexibility to invest freely. To address the issue, there have been a serious quest by the relevant authorities to implement another leverage product namely, Marginal Trading System (MTS) in Pakistan, however, despite being at advanced stages, due to the apprehensions regarding lack of transparency, this system could not be implemented and the market continues to suffer. In such situation a need was felt to carry out an exploratory research to suggest measures to reinstate investor’s confidence. The objectives set forth for the study were to elucidate existing impediments in implementation of MTS, suggest methods to bridge the gap between decision makers and the stakeholders and to recommend way out for the implementation of MTS after satisfying all existing apprehensions of the decision makers. The scarcity of the literature on the subject led us to an impasse on the very outset. However, we had to hinge on some partially relevant references to liquidity, margin requirements and volatility. An exploratory study by outreaching all stakeholders was conducted involving extensive interaction with government authorities, decision
AN EXPLORATORY STUDY
Col. Zaigham Khan
Scholar MS- Management
Riphah International University, Islamabad, Pakistan
Hammad Sultan
Scholar MS- Management
Riphah International University, Islamabad, Pakistan
Farrukh Saleem
Scholar MS- Management
Riphah International University, Islamabad, Pakistan
ABSTRACT
Due to adverse law and order situation, Pakistani Stock Exchanges have been turbulent which resulted in depletion of domestic and foreign investments. Introduction of various liquidity products, like; Carryover Trade and Continuous Funding System, failed to develop business friendly environment and diminished in the process. Currently due to the absence of any liquidity product the investors feel deprived of the margin and flexibility to invest freely. To address the issue, there have been a serious quest by the relevant authorities to implement another leverage product namely, Marginal Trading System (MTS) in Pakistan, however, despite being at advanced stages, due to the apprehensions regarding lack of transparency, this system could not be implemented and the market continues to suffer. In such situation a need was felt to carry out an exploratory research to suggest measures to reinstate investor’s confidence. The objectives set forth for the study were to elucidate existing impediments in implementation of MTS, suggest methods to bridge the gap between decision makers and the stakeholders and to recommend way out for the implementation of MTS after satisfying all existing apprehensions of the decision makers. The scarcity of the literature on the subject led us to an impasse on the very outset. However, we had to hinge on some partially relevant references to liquidity, margin requirements and volatility. An exploratory study by outreaching all stakeholders was conducted involving extensive interaction with government authorities, decision
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