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The State Bank of Pakistan (SBP) has introduced a novel mechanism aimed at enhancing transparency and credibility in the compilation of open market exchange rates.

This initiative seeks to streamline the issuance and publication process of end-of-day open market exchange rates for selected foreign currencies.

Daily end-of-day open market exchange rates for six major currencies, namely the US dollar, euro, pound sterling, Japanese yen, UAE dirham, and Saudi riyal, will now be published by the Exchange Companies Association of Pakistan (ECAP), according to the directives of the SBP.

Open market exchange rates

In order to ensure transparency, the SBP has delineated a mechanismhttps://www.brecorder.com/news/40280178 for compiling open market exchange rates, with a set deadline for its implementation by ECAP—December 26, 2023.

Under the new system, Exchange Companies (ECs) holding a minimum of 75 percent market share will furnish daily exchange rates for the six major currencies to ECAP. A representation of at least eight ECs is required to establish an end-of-day rate considered representative. The selection of contributing ECs by the SBP will be based on their business volumes, and the list for the upcoming calendar year has already been issued.

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Contributing ECs are mandated to submit buying and selling rates for the six major currencies prevailing in the market to ECAP’s dedicated email during the specified submission time from 4:00 pm to 4:30 pm. Rates submitted must represent closing levels, with the designation of a focal person for the rate submission.Open market exchange rates

Should an EC fail to submit rates for five business days in a calendar month, it is obligated to provide justification to the SBP through ECAP. In cases of the suspension or cancellation of a contributing EC’s license, the SBP reserves the right to nominate a replacement based on market share.

ECAP is set to compute the straightforward average buying and selling rates for each currency, sharing the data with stakeholders by 5:00 pm.For book revaluation, including regulatory exposure calculations, ECs will utilize the mid-rate of the ECAP-published end-of-day rates. The ECAP assumes responsibility for ensuring the accuracy of the published data.

ECs, holding a minimum of 75 percent market share, are required to submit daily exchange rates for six major currencies to the Exchange Companies Association of Pakistan (ECAP), ensuring representation and transparency in the process.

The SBP, through ECAP, has outlined specific guidelines for the submission of rates, including a submission time window and criteria for valid submissions. If an EC fails to submit rates for five business days, it must provide justification, and the SBP may nominate a replacement in case of license suspension or cancellation.

 

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