ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has introduced a Concept Paper titled “Regulating Algorithmic Trading in Pakistan” to establish a regulatory framework aimed at balancing innovation with market integrity and investor protection. The recommendations are informed by international best practices, addressing the rapid growth and challenges posed by algorithmic trading.

The SECP’s proposed framework outlines specific roles for market participants to ensure a structured approach to algorithmic trading. Exchanges will be responsible for managing the registration and testing processes, along with assigning unique identifiers to algorithmic traders. Brokers are required to implement stringent control measures and comply with audit and governance standards, ensuring thorough oversight of their trading operations.

Additionally, third-party algorithm providers will have to conform to relevant legal and regulatory requirements. This is part of a broader effort to establish a secure trading environment as Pakistan is still in the nascent stages of regulating algorithmic trading.

The SECP suggests a phased implementation strategy, initially restricting algorithmic trading access to institutional investors. Expansion to retail investors will depend on the market’s readiness, risk evaluations, and accumulated experience, reflecting a cautious approach to integrating algorithmic trading into Pakistan’s financial landscape.