Pakistan Capital Market Moves to T+1 Settlement Cycle in Major Reform

Syed Tabish

Karachi: Pakistan’s capital market has formally shifted to a T+1 settlement cycle, reducing the time required to settle trades from two days to one, in a move regulators say will enhance efficiency, lower risk and bring the country in line with international best practices.

The new system became effective February 9, 2026, with all eligible transactions at the Pakistan Stock Exchange (PSX) now settled on a trade-plus-one (T+1) basis, replacing the earlier T+2 mechanism.

The reform was implemented under the supervision of the Securities and Exchange Commission of Pakistan (SECP) in coordination with key market institutions, including the PSX, National Clearing Company of Pakistan Limited (NCCPL), Central Depository Company (CDC), State Bank of Pakistan (SBP), Pakistan Banks Association (PBA), Pakistan Stock Brokers Association (PSBA), Mutual Fund Association of Pakistan (MUFAP), and other clearing and settlement entities.

Faster settlement, lower risk

Officials say the shorter settlement cycle will allow investors to receive funds and securities more quickly, improving market liquidity and operational efficiency.

The reduced timeframe also lowers counterparty and settlement risks, as exposures remain open for a shorter period, making the market safer and more resilient.

Analysts note that quicker trade finalisation is expected to strengthen participation from institutional and foreign investors, who typically prefer markets with faster and more reliable settlement systems.

Global alignment

With the shift, Pakistan joins a growing list of markets — including the United States, Canada, Mexico, Argentina, Jamaica and China — that have adopted T+1 settlement. Several European markets, including the UK and Switzerland, are expected to implement similar reforms by 2027.

Market participants say the early adoption places Pakistan ahead of some advanced jurisdictions and signals its intent to modernise trading infrastructure.

Regulator’s view

SECP Chairman Dr. Kabir Ahmed Sidhu described the transition as a significant milestone for the country’s financial sector.

“The reform brings Pakistan’s capital market at par with modern jurisdictions by accelerating trade settlement, reducing counterparty and market risks, and enhancing liquidity,” he said, adding that the move would improve investor confidence and align the market with evolving global standards.

Institutional collaboration

The PSX, NCCPL and CDC credited the successful rollout to coordinated efforts among regulators, brokers, asset managers, custodians and banks. Stakeholders said system upgrades, testing and industry-wide readiness played a key role in ensuring a smooth transition.

The reform forms part of SECP’s broader strategy to modernise capital markets, reduce systemic risks and strengthen investor protection, officials added.