Shariah governance

The Securities and Exchange Commission of Pakistan (SECP) has begun a consultation into draft Shariah governance regulations, which it said are a comprehensive set of requirements for the governance of Shariah-compliant companies and entities, Shariah-compliant securities and Islamic financial institutions under its jurisdiction.

Shariah governance
Pakistan publishes draft Shariah governance regulations

The concept of a Shariah-compliant company and security was introduced through provisions incorporated in the Companies Act, 2017, which gave the SECP the power to implement the scheme of certification of Shariah-compliant companies and Shariah-compliant securities.

The SECP said the regulations were needed to regulate and facilitate the growth of Shariah-compliant entities in line with the SECP’s mandate of providing a Shariah governance framework and bringing SECP at par with international regulators. The regulator said that the rules would lead to the development of long-term, sustainable Islamic financial market, corporate sector and capital markets in Pakistan.

The regulations were published on 1st March and the regulator allowed 14 days for submissions commenting on the draft rules.

Prudential Regulatory Authority consults on the governance and risk related to algorithmic trading

The Bank of England’s Prudential Regulatory Authority (PRA) is consulting on the regulator’s expectations regarding firms’ governance and risk management of algorithmic trading. There have been concerns that such trading could be the cause of major market shocks globally if not controlled properly.

Algorithmic trading is a type of trading where a computer automatically determines order initiation, generation, routing or execution without human intervention. It can occur at rapid speeds, which means, the PRA said, that existing risks could be amplified if risk management and other controls are not effective or are poorly aligned with the firm’s risk appetite and governance arrangements. Consequently, the PRA stated it was crucial that appropriate governance and risk management arrangements are in place.

Among the proposals from the PRA is that a firm’s governing body is expected to explicitly approve the governance framework for algorithmic trading and its management body should identify the relevant senior management function(s) with responsibility for algorithmic trading. The deadline for comments on the PRA document is 7th May 2018.

Meanwhile, the Financial Conduct Authority has also published a report on algorithmic trading which summarised its key areas of supervisory focus in relation to MiFID II and highlighted areas of good and bad practice observed within previous cross-firm reviews.

Last Updated: 5 March 2018
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