ISLAMABAD, March 18: The Securities and Exchange Commission of Pakistan (SECP) has initiated a stakeholder consultation on the T+1 settlement cycle at the Pakistan Stock Exchange (PSX).
The consultation, expected to conclude after Eid holidays, will focus on identifying implementation challenges and assessing the impact of T+1 on liquidity, investor participation, and operational readiness and increased capital requirements.
The T+1 settlement is a progressive reform aligned with global best practices. However, stakeholders have highlighted certain operational challenges in the local context. Limited banking hours during Ramadan and delays in cheque clearances have created funding mismatches. As a result, brokers are often required to manage short-term liquidity gaps at their own risk. Market participants have also noted that a one-day settlement cycle works more effectively in a fully digitized environment, whereas in Pakistan, reliance on cheque-based transactions and existing banking cut-off timings are not fully aligned with the T+1 framework.
The objective of the consultation is to make the reform inclusive. It will also help ensure that any future decision supports market stability and efficiency. SECP has also reviewed feedback received from various stakeholders in recent weeks.
Globally, several leading markets have already transitioned to shorter settlement cycles to enhance efficiency and reduce risk. The United States, Canada, and Mexico moved to T+1 settlement in 2024, while India has been a frontrunner, fully implementing T+1 in 2023. China also operates on a T+1 framework for equities. Other major markets, including the UK and European Union, are currently in transition towards T+1, reflecting a broader global shift towards faster settlement cycles.
The SECP is engaging with key market institutions, including PSX, Central Depository Company (CDC), National Clearing Company of Pakistan Limited (NCCPL), stockbrokers, mutual funds, and custodians. Following the consultation, SECP will develop a practical and coordinated roadmap to ensure smooth and sustainable settlement processes.
Given the current global environment, marked by heightened geopolitical tensions and ongoing conflicts in key regions, financial markets worldwide are experiencing increased volatility and liquidity pressures. In such exceptional circumstances, a calibrated and consultative approach to reforms like T+1 settlement becomes essential to ensure that market stability is preserved while operational challenges are effectively addressed.
