The Securities and Exchange Commission of Pakistan (SECP) has approved the Draft Bond Pricing Agency Regulations, 2013, for soliciting feedback.

The regulations have been notified in the official gazette of Pakistan and are also available on the SECP’s official online discussion forum, where comments can be submitted by March 21.The SECP says the pricing of fixed income securities is an issue faced not only in Pakistan but also the global debt market. “This is primarily due to low trading volumes of listed debt and the fact that these securities are predominantly traded over-the-counter. The technical expertise required for valuation of debt securities is costly both in terms of infrastructure and human capital, thus prohibiting investors to value such securities themselves,” says a press release issued by the Commission.

The Mutual Funds Association of Pakistan has so far been providing prices of only corporate debt to the market. “However, in order to ensure organised development of this crucial market segment, the SECP has envisaged that an independent entity, capable of providing prices based on international benchmark pricing models, needs to be established to provide fair value of all debt securities to the market on a daily basis and in a transparent manner.”

The regulations are based on recommendations of a committee constituted by the SECP comprising representatives of the SECP, the State Bank of Pakistan and the two credit rating agencies. They broadly cover the eligibility conditions for registration as a bond pricing agency, the procedure for its registration and renewal, continuing obligations of a bond pricing agency and disciplinary powers of the SECP. The promulgation of the regulations will enable relevant entities to register with the SECP as independent bond pricing agencies and provide pricing services to the market in a transparent and fair manner.