The Securities and Exchange Commission of Pakistan (SECP) has granted in-principle approval to a major reform plan aimed at expanding the Exchange Traded Fund (ETF) market in Pakistan through better liquidity, wider investor access, and lower investment costs.
According to the SECP, the reforms will be introduced in phases under a structured timeline after consultations with major stakeholders, including the Pakistan Stock Exchange (PSX), National Clearing Company of Pakistan Limited (NCCPL), Central Depository Company (CDC), Mutual Funds Association of Pakistan (MUFAP), brokerage firms, and asset management companies (AMCs).
Under the proposed framework, asset management companies will be allowed to directly offer ETFs as part of their product lineup. This would expand access beyond the current exchange-based model where investors mainly rely on stockbrokers.
AMCs will also be permitted to help investors open brokerage accounts directly, allowing ETF investments through AMC platforms without the need for broker-managed order placement. Officials believe this will make investing easier and attract more participants.
To reduce costs and improve distribution, the new framework introduces a revenue-sharing model. Under this system, AMCs may share a portion of ETF management fees with brokers who help distribute the products.
The roadmap also proposes a bigger role for securities brokers in the ETF sector, including the possibility of launching and managing ETFs themselves. At present, ETFs are mostly issued and managed by asset management companies.
In another major proposal, passive investment products such as index tracker funds and ETFs may be included in the Voluntary Pension System (VPS). This would offer investors lower-cost exposure to capital markets compared with traditional equity-based pension products.
Additional measures include digital onboarding through multiple platforms, investor awareness campaigns, and technical upgrades across market infrastructure. Relevant institutions will receive regulatory directions to begin compliance and system improvements.
The SECP said the reforms are designed to strengthen Pakistan’s capital markets by promoting transparent, efficient, and affordable investment options for both retail and institutional investors.
Officials added that a stronger ETF market is expected to improve market depth, increase liquidity, and broaden overall participation in the stock market.
