One of the countries along the Indus River, sharing its border with developing economies like India and China, Pakistan, has always been partition news. The country faced many ups and downs. From IMF declaring KSI (Karachi Stock Index) as the world’s best index to political instabilities causing a downfall in the economy. With the Pakistan government’s semi-industrialized economy and measures to liberalize foreign investment, Pakistan’s financial market found its way back to progress and grew and created a strong and steady economy.
Pakistan Financial Market
The two main bodies controlling Pakistan’s financial market are the State bank of Pakistan (Central Bank) and the Securities and Exchange Commission of Pakistan (SECP). While the Central Bank regulates the banking activities, SECP is responsible for the rest of the market, including stocks, commodities, forex, etc.Â
Top 5 Brokerage Firms in Pakistan
The top 5 Brokerage Firms in Pakistan are Instaforex, Hotforex, Avatrade, Fxpro, and XM. The best broker in Pakistan is Instaforex because this broker is one of the biggest Asian brokers and has very often interesting promotions for traders (live and demo competitions, free car competition, start-up bonus from $1000, etc.). The next one is Hotforex, because of excellent support, a huge number of clients, fast deposit, and withdrawal.
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Pakistan Stock Market
On 11th January 2016, the Pakistan Stock Exchange (PSX) was declared by merging the three large stock exchanges of Pakistan, namely the Karachi Stock Exchange (KSE), Lahore Stock Exchange, and Islamabad Stock Exchange (ISE).Â
Before PSX, Karachi Stock was the largest stock exchange in Pakistan. Being one of the oldest stock exchanges in South Asia, KSE was declared one of the world’s top 10 stock exchanges. In 2020, PSX was declared Asia’s best stock exchange in terms of performance and the fourth position in the world. This was possible because of the stock index of Pakistan Stock Exchange, KSE 100, which made it possible by giving returns on investment equal to 38.4% in dollars, inviting more foreign investment for steady market growth.
The KSE 100 works as a benchmark that analysis and tracks the performance of the large listed companies in the PSX by creating a chart of their stock price index. It focuses on all the companies from different parts of Pakistan’s economy.Â
Pakistan stock exchange has both foreign and local, and institutional investors with over 400 brokerage houses. Traders can look for the top 10 brokerage houses in Pakistan and select the broker that aligns with their trading plan.
How to become a broker in Pakistan?
A company trying to become a broker in Pakistan must be a Pakistan/International Origin registered company or their authorized business partner with a registered office in Karachi, Pakistan. Relevant Experience Vendor must have at least 5 Years of experience in application development/support in the Financial Industry.
Cryptocurrency Trading in Pakistan
In 2018, the State Bank of Pakistan declared that any virtual currency trading or holding, like bitcoin or cryptocurrency, is banned in Pakistan. If anyone is found to be trading in such securities, they will not be provided any help in any dispute. The government is not responsible for and does not support such activities. The step was taken to protect the economy from issues like terrorist financing and money laundering.
Forex Trading in Pakistan
Unlike cryptocurrency, Forex trading is legal for the residents of Pakistan. However, the Pakistan Stock Exchange has stated that the brokers need to be regulated by the SECP (Securities and Exchange Commission of Pakistan). Many local brokers are not following this rule. There are many cases of fraud and misconduct by domestic brokers. So, most traders either look for regulated domestic brokers or go for international forex brokerage companies to enter Pakistan’s forex market. It is legal for foreign brokers to trade in Pakistan.
The regulatory body states that Forex traders are not exempt from paying taxes. They can either file an income tax return (if they are residents of the country) or give a certain percentage to the government. Although, in the initial stages of forex trading in Pakistan, forex traders were exempt from income tax, making it entirely tax-free. The government introduced this law later to prevent any unnecessary outflow of the capital from the country.
Commodity Trading in Pakistan
Commodity trading in Pakistan is centralized and regulated by the Pakistan Mercantile Exchange. It is the only company that provides a platform for commodity future trading in Pakistan. The Exchange provides a technologically advanced web platform for commodity trading under Pakistan’s Securities and Exchange Commission.Â
When the exchange was first commenced in 2007, it had only gold as a listed commodity. The trade grew in further years, and now the Pakistan Mercantile Exchange trades in crude oil, gold, and silver as their main commodities.
The best trading platform in Pakistan
The best trading platform in Pakistan is MetaTrader because most brokers use this platform, free indicators, high stability, easy installation, and user-friendly navigation. MetaTrader is a multi-asset trading platform where traders can trade forex, CFDs, commodities, crypto, ETF, stocks, and indices.
The Checklist For Pakistan Brokers
There are certain factors and aspects that need careful consideration before selecting a broker. You can refer to our checklist given below to find the right broker in Pakistan:
- Cost, fees, and charges
Trading does not mean just investing the capital available with a trader in the stock market. It is a whole process before the investment decision is taken, and the process comes with its own cost. Some fees need to be paid apart from the investment capital. These charges include broker’s fees, trading commission, the minimum amount for opening a trading account, and many more. It is advised to do research on these charges for the market or ask the broker.
- International recognition
By international recognition, we mean the position of each broker in the international financial market. Each broker has its own sources and experience, which provides him with a foreign market stance. Brokers with good sources and a better position can help the trader gain access to the trading opportunities that other traders might not provide.
- Trading experience
An experienced broker may come with a higher cost than an inexperienced broker, but going for the experienced one is worth your investment. The brokers with considerable trading experience in the market can provide you all the necessary information about the trading techniques, trends, types of accounts and securities available, the best trading platform, etc.
- Customer support
Customer support refers to the broker’s assistance to extend to the trader (the customer). How quick is the broker to keep up with your trading demands? Is he able to answer all your queries? Will he be able to help you solve disputes in case any arises? How has he been with other customers? These are some of the questions that help the trader understand the customer support level of the broker.Â
- Security or securities
Sometimes a trader may wish to trade in more than one type of security. For that, he/she must make sure what type of securities the trader is capable of trading in, or maybe he is versed with only one type of security trading. It is better to choose a broker who can trade in all the security options the trader wants to trade in rather than choosing a different broker for every different security.Â
- Regulated
The presence of a regulatory body works as a stamp of security. Make sure your Pakistani broker is regulated under the SECP for the safeguard of your funds. You cannot protect your investment from the strong forces of the market, but you can always protect them from being misused by the broker for his own personal needs, which is unlawful.Â
Conclusion
The financial market of Pakistan has a lot to offer to the traders. As one of the oldest exchanges in Asia, there is a sense of steadiness here. But no matter how strong the market is, there is always a risk of dynamic market forces that a trader and the broker must look out for. As a top-ranked entity in the list of the world’s stock exchanges and the liberalized laws for foreign investors, it has attracted several foreign traders providing growth opportunities and favorable returns to the investments.
However, as all the local brokers are not regulated under the Securities and Exchange Commission of Pakistan, there is always a risk of misuse of trader’s capital. So, the trader must make sure that the broker he/she is choosing is regulated.
