LSEG launches two FX market solutions for Pakistan’s transition to e-FX trading

The London Stock Exchange Group (LSEG) has announced the launch of two new solutions for the Foreign Exchange (FX) interbank market in Pakistan: Matching and Market Tracker.

These innovations are specifically tailored to meet the unique needs of the Pakistani market, marking a significant advancement in the region’s FX trading infrastructure and oversight capabilities.

This development aligns strategically with the State Bank of Pakistan’s (SBP) initiative to transition to a fully electronic trading framework.

Pakistan enters a new phase in FX market infrastructure

The introduction of LSEG’s Matching and Market Tracker in Pakistan signifies a new phase in the nation’s FX market infrastructure. It aims to enhance operational efficiency, increase security, and ensure regulatory compliance, addressing the evolving demands of the financial industry.

Matching is an FX Central Limit Order Book (CLOB) venue that provides traders with access to leading liquidity and currency coverage. It is designed to be transparent, efficient, and cost-effective, enabling FX traders to execute trades anonymously within mutually agreed limits.

Market Tracker is an advanced tool that allows central banks to receive detailed information about trades executed on FX Trading and Matching by participants within their jurisdiction. This enhances their oversight capabilities.

Nadim Najjar, Managing Director, Central and Eastern Europe, Middle East and Africa, LSEG said: “We are proud to introduce Matching and Market Tracker in Pakistan. These launches are a testament to our commitment to bringing about transformation in the FX markets through innovative technology and strategic partnerships. Our collaborative efforts with the State Bank of Pakistan are set to redefine the landscape of currency trading in the region.”

A notable feature of FX Matching is the anonymity it offers until a trade match is made. Dealers can quote or respond to quotes without revealing their identities, fostering a more open and unbiased trading environment. The platform sets a minimum trading lot size of $500,000 and its multiples, and participants can establish credit limits with their counterparts.

This move aligns with recent recommendations from the International Monetary Fund (IMF), which advised Pakistan to avoid exchange rate restrictions and to limit SBP interventions in the FX market to reserve-building purposes. The IMF also urged for the elimination of existing exchange restrictions and multiple currency practices.

In line with these recommendations, Pakistan has committed to introducing reforms in the foreign exchange market. The new online FX trading platform is a testament to this commitment, with the plan presented to the IMF. However, the country faces economic challenges, as evidenced by the recent decline in foreign exchange reserves held by the SBP, which dropped by $1.2 billion to $4.5 billion. This decline is partly due to repayments to Emirates NBD Bank and Dubai Islamic Bank.