PSX opens dedicated Shariah trading counter for Islamic investors

The Pakistan Stock Exchange launched a dedicated Shariah-compliant trading counter in Karachi on Thursday, giving retail and institutional investors a regulated route to trade securities that conform to Islamic financial principles. The initiative follows approval of the Shariah Trading Counter Regulations by the Securities and Exchange Commission of Pakistan.

The new counter permits investment in Shariah-compliant listed shares, government Ijarah Sukuk and corporate Sukuk. Trading in securities classified as non-compliant is blocked, although investors may sell existing non-compliant holdings when bringing their portfolios into conformity with the platform’s requirements.

Thirty-nine brokerage firms have joined the system through dedicated Islamic windows, while two additional brokerage houses hold licences to operate entirely as Shariah-compliant brokers. The exchange said the counter would function under operational procedures and regulatory controls designed to ensure that transactions remain within the approved framework.

Conventional interest-based leverage products, including the Margin Trading System, cannot be used on the counter. Murabaha Share Financing has been made available as an Islamic alternative, while short selling and derivatives trading are also prohibited. These restrictions are intended to prevent account holders from entering transactions that conflict with the counter’s stated principles.

The launch was marked by a gong ceremony attended by officials from the securities regulator, the State Bank of Pakistan, the Central Depository Company and the National Clearing Company of Pakistan. Representatives of brokerage firms, the stock brokers’ association and Shariah scholars also participated in the event.

Managing Director and Chief Executive Farrukh H. Sabzwari said a separate trading environment supported by automated compliance controls should improve investor confidence and make Islamic investment products easier to access. He noted that the number of investor accounts at the exchange had crossed 650,000, with younger Pakistanis, particularly millennials and Generation Z, contributing significantly to recent growth.

A new Shariah Portal has also been added to the exchange’s data platform, providing investors with a consolidated list of eligible shares and Sukuk. Customers opening ordinary or Sahulat accounts through participating brokers will complete documentation that includes a Shariah-compliant customer relationship agreement and risk disclosure statement.

Securities regulator Commissioner Imtiaz Haider said a substantial share of listed equities and mutual fund assets already meets Shariah requirements. He said the dedicated counter could broaden participation in the capital market, generate new business opportunities for brokerage firms and give investors greater confidence that their transactions are being processed under a defined Islamic framework.

The initiative forms part of Pakistan’s wider effort to expand Islamic finance and move away from interest-based financial activity. The Federal Shariat Court directed the government in 2022 to eliminate riba from the financial system by 2027, placing pressure on regulators and financial institutions to develop practical alternatives across banking, investment and capital-market services.

The next phase is expected to include wider availability of digital retail Sukuk, new Shariah-compliant instruments for liquidity and risk management, and additional legal support for Islamic financial services. The effectiveness of the counter will depend on investor adoption, broker readiness and continued regulatory oversight as the exchange works to convert strong demand for Islamic finance into deeper participation in Pakistan’s capital market.