Pakistan Stock Brokers Association (PSBA) has achieved a favorable ruling from the High Court of Sindh regarding the Futures Eligibility Criteria (FEC) for trading in deliverable futures contracts (DFC) and cash-settled futures contracts (CSF). This ruling follows a constitutional petition filed by the PSBA in July 2021, challenging the validity of the criteria as notified by the Pakistan Stock Exchange (PSX) in a notice dated June 17, 2021, with the prior approval of the Securities and Exchange Commission of Pakistan (SECP). The PSBA’s petition raised several critical issues, primarily focusing on the legality of Criteria 4(i) of the Eligibility Notice. The association argued that the criteria were never subject to public comment, thus contravening constitutional provisions and rendering them void ab initio.
The PSBA sought the following from the court: A declaration that Criteria 4(i) is illegal and void due to lack of public consultation. An order to withdraw Criteria 4(i) and any actions taken based on it. A suspension of the removal of entities from the approved list of eligible securities due to this criterion. A suspension of the operation of Criteria 4(i). A permanent restraining order against the SECP and PSX from acting based on this criterion.
During the first hearing on July 15, 2021, the court issued an interim order, stating that the points raised required consideration and that the later part of Criteria 4(i) related to court stay orders would remain inoperative pending further review. In a ruling, the court affirmed the PSBA’s position, concluding that the introduction of Criteria 4(i) by the SECP violated the statutory requirement for public notice under Section 169(4) of the Securities Act (SA), 2015.
The court found that the SECP’s failure to elicit public opinion on this amendment rendered the criteria illegal and without legal effect. The court stated, “Once SECP introduced Criteria 4(i) to the FEC, it triggered the precondition of public notice, which the SECP miserably failed to meet.”
It further emphasized that the provision constituted an infringement of fundamental rights, undermining court orders and the right to access justice, as established in previous case law.
