Pakistan Mercantile Exchange wants cash-settled crypto contracts – Journal


KARACHI: The Pakistan Mercantile Exchange (PMEX) is eager to introduce cash-settled cryptocurrency contracts to help local investors gain exposure to the increasingly popular global peer-to-peer digital payment system.

Talk to Dawn in a recent interview, PMEX chief executive Ejaz Ali Shah said the central monetary authority should reconsider its 2018 ruling against cryptocurrencies, as they are recognized around the world as a medium of exchange.

“It’s just a matter of time. How can you stay away from something that is being adopted by the rest of the world so quickly?” Said Mr. Shah, who runs the only commodities futures exchange. from the country.

Trading in cryptocurrencies is officially banned in Pakistan, although the country boasts of having one of the highest cryptocurrency adoption rates in the world, according to the Global Crypto Adoption Index. Chainalysis 2021 coins.

Still, its growing traction continues to stay under the radar due to the many operators running illegal futures trading platforms across the country. “Drive through Sharea Faisal and you will meet such operators after every mile. They are linked to foreign brokers and work as their local agents, ”he said, adding that these were illegal entities and should be shut down immediately.

By its own estimate, the PMEX only manages five percent of the total futures transactions currently underway in the country.

Futures trading

From gold, silver, oil and gas to copper, palladium and even global stock market indices, the PMEX allows around 25,000 investors to buy and sell different types of contracts on its platform each. day. With the exception of some gold contracts which are deliverable, all are settled in cash as their values ​​are linked to international commodity prices.

Trading on the PMEX is carried out on margin. For example, an investor should only offer Rs5 to buy a contract of Rs100. They make a profit of Rs2 if the price increases to Rs102 and register a loss of Rs2 if the price drops to Rs98. Although they never get the actual delivery of the goods, companies can theoretically hedge against the price volatility of their inputs through the PMEX.

“We have a state-of-the-art trading system in place. Allowing cryptocurrencies will ensure that there is no outflow of foreign currency. All transactions will be in rupees. It will be documented and may be taxed. We will do KYC [know-your-customer] and ensure investor protection. The SBP should reconsider its decision, ”he said.

Treasury bill contracts

In addition to cryptocurrencies, the PMEX has been working on a proposal to introduce treasury bill contracts on the stock exchange, which will complement the government’s plan to promote the participation of individuals in its short-term debt trading.

“We are having serious discussions with the SBP on this issue. The central bank is very keen on it. They told me in principle that they wanted the PMEX to do it. We are currently developing a proposal and defining the modalities for their review, ”he said.

The government has long pushed the Pakistan Stock Exchange (PSX), the only national stock trading platform, to develop a secondary market for short-term government debt. However, that hasn’t happened so far because PSX’s customer base is mostly business, according to Shah.

“These companies have their own treasury. They don’t need the PSX to trade treasury bills. Likewise, brokers have little interest in this segment.

Banks are also resisting it because the participation of individuals will cannibalize their deposit base, ”he said, noting that the predominantly private nature of the PMEX investor base makes the stock market an ideal platform for promotion. treasury bills.

Posted in Dawn, le 19 December 2021

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