IMPLEMENTATION OF DERIVATIVES IN PAKISTAN THROUGH “FIX” PROTOCOL

Abstract

The purpose ofthis study is to provide a solution to bring stability in exchange rates for import oriented countries like Pakistan itself, introduce financial instruments or precisely “Financial Derivates” in the Pakistani market to protect producer/manufacturer from exchange losses, increase investments in the country by introducing a derivative market in Pakistan where derivative instruments like Futures can be traded to hedge losses using FIX protocols and rewarding the economy with a healthy growth rate. Not only does it provide a solution for business corporations to hedge their losses but provides a huge platform to the government as well to increase their revenues. Government bodies such as the Pakistan Stock Exchange, Securities and Exchange Commission of Pakistan, National Clearing Company Pakistan and Central Depository Centre’s are involved in the transactions made, keeping their own commission and tax charges empowering them to collect additional taxes and impose regulation on such impactful trading market. The Derivatives market such as Currency Carry Trade allows a leverage in trade against credibility and credit rating as per relevant applicable policies and laws, it enables a trader to sell and purchase commodities currencies and indexes weighing beyond what the balance sheet support and enhances the profitability horizon, however, it works both ways and creates equal probability for a loss to be booked beyond what the balance sheet oftrader/investor can handle