This blog is written by Mr. Nauman Ul Qadeer. Please read this blog and provide your valued comments

The purpose of this blog is to give a brief introduction about commodity / mercantile exchange and to identify registration / licensing requirements of Future Brokers only.




Commodity Exchange or Mercantile Exchange is a market for buying and selling of commodities to be delivered at future date. Commodity in relation to future contracts means any good that can be exchanged with another good and it may include agriculture, livestock, fisheries, forestry, mining, energy goods, etc.


In Pakistan, Pakistan Mercantile Exchange Limited (PMEX), regulated by the Securities and Exchange Commission of Pakistan (SECP), is the only future market in Pakistan, that offers commodity exchange services through Future Contracts in Pakistan. Securities and Exchange Commission of Pakistan (SECP) regulate PMEX primarily through Future Market Act, 2016, referred as “Act” afterwards.


Regulated Persons are persons licensed by SECP to perform Regulated Activities and Regulated Activities means Regulated Persons carrying out any or all of the following activities: –

  • Future’s Broker;
  • Future’s Adviser
  • Representative;
  • Any other activity as may be notified by the Federal Government.


Act prohibits to perform / carry out Regulated Activities unless licensed to perform such activities.




Extracts of the Definitions given in Act for “Regulated Activities” are as follows: –


  • Future’s Broker means “the person who makes or offers to make with a view to purchase or sale of future contracts”.
  • Future’s Adviser means “the person who gives advice for investment or issues analysis reports etc., with respect to future contracts excluding analysis or advice given to over print / digital media”.
  • Representative means “the person who is under employment or associated with Regulated Person for work (other than ordinarily performed by the Accountant, Clerks or Cashier) or is an agent of the Regulated Person”.




Futures Brokers (Licensing & Operations) Regulations, 2018, afterwards referred as “Regulations”, define licensing requirements and procedures for Future Brokers dealing in Future Contacts based on specified commodities and financial instruments offered by or traded on futures exchange other than Securities Exchange.


Licensing Procedure for Future’s Broker is as follows: –


  1. Any person desirous of undertaking future broker activities shall seek prior permission from SECP. Prior Permission means before obtaining TRE Certificate of PMEX on specified form as has been set out in “Regulations”.
  2. Prior Permission granted above shall be valid for 6 Months (unless extended for max. 3 months).
  3. During the validity of Prior Permission, Sponsor shall ensure to secure TRE Certificate, company incorporation as future broker and apply to SECP for license to operate as Future Broker. (Application Formats to apply for license are given in regulations).


Eligibility Criteria for Future’s Broker: –


  1. Applicant has prior permission from SECP, as explained above;
  2. Applicant MOA & AOA allow to apply for grant of license as “future broker”;
  3. Applicant is Public or Private Company (not a single member company);
  4. Applicant holds a valid TRE Certificate;
  5. Applicant identifies names of sponsors who hold not less than 51% shareholding (not less than 25% shareholding in case of listed company) and shareholding shall not be affected without prior approval of Commission;
  6. Applicant and its sponsor shall not have controlling interest in any other company holding license as a Future Broker;
  7. Applicant, Sponsors, Directors and Senior Management Officer are complying with Fit and Proper Criteria as given in regulations;
  8. The Chief Executive Officer, Director or employees seeking license as Future Broker do not hold any office in any other company;
  9. Sponsors shall always ensure to have at-least 20% representation on its Board of Directors;
  10. Names of Sponsors, Directors and Chief Executive as appearing on the Active Tax Payer List issued by the Federal Board of Revenue;
  11. Applicant shall ensure and continue to ensure minimum paid up capital and net worth of Rupees Twenty (20) Million or as specified by the commission from time to time;
  12. Applicant has and shall continue to have the required number of personnel of employees having mandatory certification as specified by the Commission from time to time; and
  13. Its Ultimate Beneficial Owners have not been convicted in any predicate offence(s) provided under Anti-Money Laundering Act 2010 and Anti-Terrorist Act 1997 or any other criminal offense.


Nauman Ul Qadeer

March 31, 2021