ISLAMABAD: Following serious reservations of Pakistan Stock Brokers Association (PSBA), the Securities and Exchange Commission of Pakistan (SECP) has initiated a stakeholder consultation on the T+1 settlement cycle at the Pakistan Stock Exchange (PSX). PSBA has also recommended that reverting to the T+2 settlement cycle is necessary in the larger interest of restoring and improving overall trading volumes. In this regard, the SECP has also issued a press statement to the media here on Wednesday on the subject, “the SECP to Consult Market on T+1 Settlement to Safeguard Investor Interests”. According to a letter (March 9) of the PSBA to the Pakistan Stock Exchange Limited, we acknowledge that the implementation was carried out through a consultative process, including market testing, mock sessions, and discussions with relevant market participants. In this regard, an Implementation Committee (IC) was also formed, with the representation of all segments. However, market participants view it as having given rise to financial and systemic challenges due to misalignment with existing levels of technological maturity, institutional capacity, and prevailing investor practices, including delays in the timely issuance of clearing cheques. In this context, the Pakistan Stock Brokers Association (PSBA) convened a market-wide session with its members to assess the practical and operational implications, the PSBA said. The feedback provided and the concerns raised during the session are summarized for your review and due consideration. The market performance following the implementation, including a correction exceeding 20%, together with the influence of other factors, indicates that an immediate reversion to the T+2 settlement cycle may merit consideration as a prudent measure to maintain the orderly functioning of the Capital Market ecosystem. By reason of the substantial volume of physical clients’ cheques used to meet financial obligations, it is noted that Pakistan’s Banking Infrastructure, operating on a two-day cheque clearing cycle under the regulatory framework of the State Bank of Pakistan, is not presently equipped to support a T+1 settlement cycle. This requires client funds to be available within 24 hours, thereby creating a fundamental structural incompatibility. In practice, clients remitting cheques for settlement cannot reliably ensure the readiness of funds within the compressed T+1 window, leading to settlement failures or forced liquidations. Prior to implementation, the operational reality was that clients depositing cheques at day-end were subject to a T+2 clearing cycle by banks, effectively resulting in a T+3 settlement period. By transitioning to a T+1 settlement cycle without requisite supporting infrastructure, the system has effectively compressed the practical settlement timeline by approximately 50% overnight. This framework affords a limited timeframe to verify client creditworthiness, monitor risk, and implement corrective measures for the settlement obligations. The new settlement timeline necessitates that market participants maintain higher levels of liquid reserves to meet their obligations within a period of less than 24 hours. The effective funding window is, in practice, even further compressed, as the clearing house requires settlement payments by 12:00 p.m., even though trades may be executed as late as 3:30 p.m. on the preceding trading day. Under the new regime, brokers are compelled either to require upfront fund deposits before trade execution, arrange financing facilities, or decline to accept orders altogether. This has materially affected liquidity management, increased the cost of doing business, and impaired price discovery in the market. In instances where investors rely on the redemption of mutual fund units to arrange liquidity for settlement obligations, the processing and release of funds by Asset Management Companies (AMCs) generally occur by the Close of Business on the following day, and equity fund redemptions may permit up to five days for the settlement of proceeds. Accordingly, clients whose settlement capacity is based on such redemptions face difficulties in meeting their obligations within the prescribed timeframe. Moreover, and of particular importance, a clarification or rebuttal from the Regulator(s) be provided in response to the circulated news slides, which convey the impression that brokers are resisting the T+1 settlement cycle due to reliance on interest income, which is not the case. Therefore, the broader market is of the firm and considered view that reverting to the T+2 settlement cycle is necessary in the larger interest of restoring and improving overall trading volumes, the PSBA added. Meanwhile, a press release of the SECP issued on Wednesday said, The Securities and Exchange Commission of Pakistan (SECP) has initiated a stakeholder consultation on the T+1 settlement cycle at the Pakistan Stock Exchange (PSX). The consultation, expected to conclude after Eid holidays, will focus on identifying implementation challenges and assessing the impact of T+1 on liquidity, investor participation, and operational readiness and increased capital requirements. The T+1 settlement is a progressive reform aligned with global best practices. However, stakeholders have highlighted certain operational challenges in the local context. Limited banking hours during Ramadan and delays in cheque clearances have created funding mismatches. As a result, brokers are often required to manage short-term liquidity gaps at their own risk. Market participants have also noted that a one-day settlement cycle works more effectively in a fully digitized environment, whereas in Pakistan, reliance on cheque-based transactions and existing banking cut-off timings are not fully aligned with the T+1 framework. The objective of the consultation is to make the reform inclusive. It will also help ensure that any future decision supports market stability and efficiency. SECP has also reviewed feedback received from various stakeholders in recent weeks. Globally, several leading markets have already transitioned to shorter settlement cycles to enhance efficiency and reduce risk. The United States, Canada, and Mexico moved to T+1 settlement in 2024, while India has been a frontrunner, fully implementing T+1 in 2023. China also operates on a T+1 framework for equities. Other major markets, including the UK and European Union, are currently in transition towards T+1, reflecting a broader global shift towards faster settlement cycles. The SECP is engaging with key market institutions, including PSX, Central Depository Company (CDC), National Clearing Company of Pakistan Limited (NCCPL), stockbrokers, mutual funds, and custodians. Following the consultation, SECP will develop a practical and coordinated roadmap to ensure smooth and sustainable settlement processes. Copyright Business Recorder, 2026