Home / Investors / Investor Education / Regulatory Frameworks

Rules & Regulaions

Regulatory Framework

The Stock Exchange is governed under the Securities and Exchange Ordinance 1969 Framework. The ordinance prohibits dealing in listed securities outside the Stock Exchange by any person and transaction in securities listed in the Stock Exchange. The Capital market has a triangular foundation in Pakistan comprising of the Stock Exchange, Central Depository Company (CDC) and National Clearing Company Pakistan Limited (NCCPL).


The Securities & Exchange Commission of Pakistan  (SECP) was setup in pursuance of the Securities & Exchange Commission of Pakistan Act, 1997 and become operational on January 01, 1999. It has investigative and enforcement powers.

Regulation of Corporate Sector & Capital Market

Supervision and Regulation of Insurance Companies

Supervision and Regulation Non-Banking Finance Companies & Private Pension Schemes

Oversight of various External Service Providers to the Corporate and Financial Sectors, including Chartered Accountants, Credit Rating Agencies, Corporate Secretaries, Brokers, Surveyors etc


In the capital market development program, Asian Development bank gave recommendations to have a separate individual and centralized system for all three Stock Exchanges. So in replacement of the old system, a complete automated electronic settlement system was developed called the National Clearing & Settlement System (NCSS).Any security which becomes live in Central Depository System, on ready status, is inducted accordingly into the National Clearing & Settlement System (NCSS).

The main purpose of the NCSS system is to act as clearing house for all capital market transactions. The system provides clearing and settlement services for all markets including Ready, Future, CFS, IPO, etc. The system caters and facilitates brokers, non brokers, and banks. For more details

3. Central Depository Company (CDC)

The three Stock Exchanges are linked to the Central Depository System (CDS) of the Central Depository Company. The company was developed to remove physical securities management. The current prevailing system helps in transferring shares from one client account to another through an electronic book entry system (CDS). The main aim of the CDC is to act as a central depository of securities on behalf of all the financial institutions and investors.For more details

It has solved investor problems related to stock handling on the settlement date, registration of shares, and exercise of corporate action benefits. This system has resolved issues like Physical Shares Handling, unproductive physical shares settlement, risk management and pledge procedures. This has helped in quicker settlement and increased stock market performance. About 97% trades settled by the Stock Exchange are now handled through the CDS. Other benefits may include:

  • Instantaneous transfer of ownership (electronically)
  • Elimination of fake certificates
  • Convenience / Savings to investors
  • Confidence building of foreign & local investors by reducing the transaction risk
  • Greater transparency of transactions
  • Substantial savings in stamp duty
a. CDC Account Types

There are generally two options that an investor or broker has, to open an account with the CDC. These are:

i. Sub Accounts:

Investors open client accounts (sub accounts) with the participants (brokers and financial institutions) without direct access to CDC. This option had the disadvantage of complaints by investors of mishandling of shares by brokers.

ii. Investor Account Services:

Investors open account services giving direct access to the CDC.

The second option of account opening has an advantage over the first, due to the following reasons.
  • Greater Security:

Investors have direct access to their securities through the CDC and have the opportunity to give instructions to the CDC on the handling of their securities. Also the CDC is regulated by the SECP, ensuring transactions are executed in a fair and secure manner.

  • Greater Control:

Investors need not be bothered by the physical holding of their securities. That task has been transferred to the CDC and even though brokers are involved in the trade, the transactions take place according to the specific instructions given by the investors to the CDC.

  • Value Added Services:

Investors are able to get enhanced services from the CDC on request. Hence investors are constantly updated on the progress of the securities they hold. For more Details