ifmp - news letterifmp.org.pk/downloads/newsletter-may-2018.pdfmay 2018 ifmp newsletter page 6 03...

BUSINESS AND ECONOMIC NEWSFLASH

URDU GLOSSARY

MARKETS IN REVIEW

QUOTES AND JOKES

TERMS OF THE MONTH

VOLUNTARY PENSION SCHEMES IN PAKISTAN

NEWSLETTER MAY 2018

Institute of Financial Markets of Pakistan

The name of the institute has been changed

from Institute of Capital Markets to

Institute of Financial Markets of Pakistan

Contact Us

Address: Park Avenue Building, Suite No. 1009,

10th Floor, P.E.C.H.S Block No. 6, Shahrah-e-Faisal,

Karachi. Tel: +92 (21) 34540843-44

MESSAGE FROM THE CEO

INTRODUCTION TO THE INSTITUTE

IFMP ACTIVITIES

TERMS OF THE MONTH

BUSINESS AND ECONOMIC NEWSFLASH

URDU GLOSSARY

QUOTES AND JOKES

MARKETS IN REVIEW

ARTICLE ON

WHAT IS FINTECH (AND HOW HAS IT EVOLVED)

00 CONTENT

Message from the CEO

Introduction to the

Institute

IFMP

Activities

Article:

What is FinTech (and how

has it evolved)

Urdu Glossary

Quotes and Jokes

Business and Economic

Newsflash

Page: 3 Page: 4

Page: 7 Page: 12

Page: 16 Page: 17

www.ifmp.org.pk 92 (21) 34540843-44 [email protected]

Terms of the Month

Page: 11

Page: 5

Markets in Review

Page: 18

01

Message from the Chief Executive Officer

◊ May 2018 IFMP Newsletter ◊

he last few years have seen a rapid growth in size, quality and

sophistication of financial markets, because of changes in the

policy and regulatory environment, the entrepreneurial initiatives

of individuals and institutions, and the availability of trained man-

power. The continuing growth of financial markets is further adding

to the demand for well-trained professionals.

Institute of Financial Markets of Pakistan is dedicated to the profes-

sional development of financial markets and research on financial markets as well as the

well being of financial markets by educating the professionals about the norms and ethics

being practiced in the markets. IFMP has had a pioneering role in meeting the demand for

educated manpower. It is Pakistan's first specialized institution devoted to the education

and updating of knowledge of manpower for financial markets. It will provide high-

quality educational standards for all types of financial market participants; investors,

brokers, mutual funds, investment banks and policy makers.

The Institute's main activities are (1) Licensing the professionals working in the financial

markets by certifications. The institute’s key responsibility is to educate the professionals

working in different financial markets of Pakistan through examining their knowledge in

their relevant field of work; (2) Studying the latest developments in the financial markets

in order to discover whether there is such a thing as an ideal market economy; and (3)

Contributing to the development of financial markets in Pakistan. By means of these three

activities the Institute seeks to communicate its ideas to the audience both at home and

overseas. The Institute's research is intended, first and foremost, to be neutral, profes-

sional and practical. Rooted in practice, it aims to contribute to the healthy development

of Pakistani financial markets as well as to related policies by conducting neutral and pro-

fessional studies of how these markets and the financial system are regulated and orga-

nized and how they perform.

The economy is changing all the time. The Institute hopes that, by responding to these

changes positively, it can contribute to the dynamic development of the country's finan-

cial markets as well as of the economy itself.

Mr. Muhammad Ali Khan

T

02

Introduction to the Institute


The Institute of Financial Markets of Pakistan (IFMP), Pakistan’s first

securities market institute, has been established as a permanent platform to de-velop quality human capital, meet the emerging professional knowledge needs of

financial markets and create standards among market professionals. The Insti-tute has been envisioned to conduct various licensing examinations leading to

certifications for different segments of the financial markets. IFMP develops a pool of trained and certified professionals, skilled not only to deal in convention-

al instruments but also to trade in new and complex financial market products.

◊ FEE STRUCTURE ◊

Candidate Registration Fee Rs.10,000

Examination Registration Fee Rs.7,000

Membership Fee (Annual) Rs.5,000

Study Guide (Hard Copy) Rs.800

◊ EXAMINATION SCHEDULE ◊

Sun, May 27, 2018

Sun, July 29, 2018

Sun, September 30, 2018

Sun, November 25, 2018

PROGRAMMES

LICENSING CERTIFICATIONS INSURANCE CERTIFICATIONS SPECIALIZED CERTIFICATIONS

Fundamentals of Capital Markets Certification

Pakistan’s Market Regulations Certification

Stock Brokers Certification

Mutual Funds Distributors Certification

Commodity Brokers Certification

Financial Analysts Certification

Mutual Funds Basic Certification

Securities and Futures Advisors’ Certification

Programme (Basic and Core Modules)

General Takaful Agents

Certification

Family Takaful Agents

Certification

Life Insurance Agents

Certification

Non-Life Insurance Agents

Certification

Bancassurance Certification

Bancatakaful Certification

Financial Derivative Traders Certification

Compliance Officers Certification

Clearing and Settlement Operations

Certification

Risk Management Certification

Capital Budgeting and Corporate Finance

Certification

Investment Banking and Analysis Certification

Islamic Finance Certification

Fixed Income Certification


IFMP Activities 03

IFMP signed MoU with University of Central Punjab (UCP)

IFMP signed MoU with Superior College Lahore


IFMP Activities 03

IFMP signed MoU with Bank Alfalah for the capacity building in the area of

Fixed Income Securities Trading and Investments (collaboration with USAID).

IFMP - Insurance Sales Agents Certification Trainings of Adamjee Life Assur-

ance Co. Ltd. Employees

04


Article

What is FinTech (and how has it evolved)

Financial Technology has been around virtually as long as the financial services industry itself. But since the econom-ic meltdown of 2008, a new breed of disruptors has displaced traditional ecommerce providers with more efficient services.

When you use PayPal, Apple Pay, Google Wallet or simply your credit card to make an online purchase, you the con-sumer, the ecommerce retailer and the banks behind the money exchange are using FinTech.

When Charles Schwab, TD Ameritrade or Fidelity Investments purchase stocks and the banks settle the securities transactions, that's FinTech.

And when you go online to find the best mortgage rates for that dream home or to refinance the one you're in, that's FinTech.

FinTech defined

Broadly speaking, FinTech (financial technology) is anywhere technology is applied in financial services or used to help companies manage the financial aspects of their business, including new software and applications, processes and business models.

Once considered more of a back-end, data center processing platform, FinTech has in recent years come to be known as the basis for end-to-end processing of transactions over the Internet via cloud services.

FinTech is not new. It's been around in one form or another virtually as long as financial services has. After the glob-al financial crisis of 2008, however, FinTech has evolved to disrupt and reshape commerce, payments, investment, asset management, insurance, clearance and settlement of securities and even money itself with cryptocurren-cies such as Bitcoin.

"Customers now expect seamless digital onboarding, rapid loan approvals, and free person-to-person payments – all innovations that FinTechs made popular. And while they may not dominate the industry today, FinTechs have suc-ceeded as both standalone businesses and vital links in the financial services value chain.

How FinTech can be disruptive

According to Deloitte and the WEB, disruptive forces that have reshaped the FinTech industry include, but are cer-tainly not limited to:

The growth of online shopping, which is expanding quickly at the expense of in-person shopping, leading to the dominance of online, cashless solutions for transactions.

A shifting balance of power that swings from banks and other financial services to those who own the customer ex-perience. Banks are eliminating in-person services and looking to FinTech and large technology companies for other

05


Article

ways to engage customers.

New trading platforms that are collecting data to create an aggregated market view and using analytics to uncover trends.

Insurance products, which are becoming more tailored to customers who, in turn, are demanding coverage for spe-cific locations, uses and timeframes. That's driving insurers to collect and analyze additional data about their clients.

Artificial intelligence, which now plays a role in differentiating financial services products as it replaces complex hu-man activities.

Transaction process improvement and middleware, both of which remain expensive. This is pushing traditional fi-nancial services firms to consider partnerships with marketplace lenders for FinTech solutions that don’t require a full infrastructure overhaul.

A new world of regulations

After the 2007-2009 financial crisis, regulators turned up the heat on the larger players in the financial services in-dustry, enabling smaller and more agile firms and upstarts to gain traction. For example, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 created a number of new oversight agencies and represented the largest set of regulatory oversight changes in the financial services industry since the Great Depression.

In addition, companies that provided integration technology, services, data and analytics for banks saw a significant increase in the use of their hosted services, according to Jason Deleeuw, a vice president at Piper Jaffray covering financial and business services companies.

06


Article

After spending billions of dollars and thousands of hours to comply with that new regulatory landscape, the

financial services marketplace turned its collective attention to rolling out new products and services. In some

cases, banks became the technology developers. But in most cases, the financial services sector found it far

simpler to outsource the technology for electronic payments or onboarding of customers rather than build it in

-house, Deleeuw said.

For example, online mortgage servicing platforms saw a surge in adoption by banks for processing client ac-

counts.

"They [the banks] are dealing with more regulatory issues around servicing mortgages, so it's becoming more

costly to do this with an internal system," Deleeuw said. "I think it's helped drive banks more toward out-

sourced solutions because of the cost and reduced regulatory risk involved in trying to manage their own in-

ternal systems."

“With increased interest in service-based systems, the technology grew more robust even as the costs of imple-

menting it fell, enabling even further proliferation”

The explosion of ecommerce has created a healthy ecosystem of start-up tech suppliers for the financial ser-

vices, retail and other industries. While cautious, banks in particular are quick to adopt technology that can

create new revenue streams or bring on efficiencies. So they sought help integrating new technologies, such as

peer-to-peer payments, into their massive legacy infrastructure.

Over the past decade, the FinTech supplier ecosystem has grown from 10 or so key players to more than

10,000 companies, according to Piscini. That, in turn, has spawned a new service from Deloitte known as eco-

system relationship management, or ERM.

"The way you manage 10,000 suppliers is completely different from the way you managed 10 technology part-

ners," Piscini said. "That's a big challenge for large organizations: how do you manage your 10,000-supplier

ecosystem versus the 10 relationships you had before. For them, it's not as much about technology but what

kind of innovation can I source and how do I do that in an ecosystem that's much more fragmented than it used

to be?"

05


Article

Banks as tech providers

Banks have also become technology providers, competing with the likes of PayPal or Square and sometimes

collaborating on rolling out shared platforms to enable services.

For example, earlier this year Early Warning Services LLC. – a technology provider owned by Bank of America,

BB&T, Capital One, JPMorgan Chase and Wells Fargo – unveiled its new Zelle person-to-person payments ser-

vice. The service platform is expected to be supported by more than 30 banks this year and will let 86 million

U.S. mobile banking customers send and receive payments as an alternative to cash and checks.

07

Terms of the Month


Get Yourself Registered!!

Last Date for Registration for 29th July 2018

Examination

6th July, 2018

ANALYST

A professionally qualified and experienced person, normally an

employee of a brokerage firm, an asset management company or

an independent research firm who studies companies, commodi-

ties and capital markets, and makes buy and sell recommenda-

tions on stocks, commodities and financial instruments. Most

analysts specialize either in a specific industry, sector or com-

modity.

ANNUAL REPORT

Yearly record of a company's financial condition. It includes a

description of the firm’s operations, its balance sheet and income

statement.

ARBITRAGE

Profiting from differences in the price of a single security that is

traded on more than one market. Taking advantage of certain

prices in different markets by the purchase or sale of any instru-

ment and at the same time taking an equal and opposite position

in a related market to profit from any small price differential.

ASK

The price at which a broker or dealer is willing to sell a stock,

commodity or any other financial instrument.

AUTHORIZED STOCK

Authorized stocks are the maximum number of shares of stock

that a company can issue. It's specified initially in the company's

Memorandum and Articles of Association, but it can be changed

with the shareholder approval. It is also called authorized shares

or shares authorized.

AUTOMATIC EXECUTION

Any order that is automatically executed by a computer without

any human intervention based on pre-set terms and conditions.

ASSIGNMENT

Assignment is the receipt of an exercise notice by an option writ-

er that requires him to sell (in the case of a call) or purchase (in

the case of a put) the underlying security at the specified strike

price. Assignment occurs when an option holder exercises his

option by notifying his broker, who then notifies the Clearing

System.

AUTOREGRESSIVE

Using past data to predict future movement of market or finan-

cial instrument. As a general application it is using of past data

or variable of interest to predict future values of the same varia-

ble.

AVERAGE MATURITY

The average time to maturity of securities held by a mutual fund

is called Average Maturity. Changes in interest rates have great-

er impact on funds with longer average life.

08

Business and Economic Newsflash


Interest rate hiked to 6.5pc, risks mounting

The central bank announced the Monetary Policy Statement with details to justify second increase in the interest

rate during the current fiscal year. In January, the key rate was raised by 25 basis points to 6pc after keeping it

steady for 20 months.

The SBP said the balance of risks to the sustainability of the healthy growth with low inflation has shifted due to de-

teriorating balance of payments and this was due to high petroleum prices and limited financial inflows.

Another reason for this imbalance was the revised fiscal deficit which was 5.5pc GDP as compared to 4.1 per cent

for FY18.

“These twin deficits -- depicting the elevated aggregate demand in the country -- are adversely affecting the near-

term macroeconomic stability,” said the SBP.

The SBP believes that the economic growth is provisionally estimated to achieve a 13-year high level of 5.8pc for

FY18. Concurrently, headline inflation remains moderate and is expected to stay well below the annual target of

6pc.

The CPI inflation remained 3.8pc during the first 10 months of this fiscal year while the food inflation clocked in

1.8pc during this period.

“Contrary to this, average of year-on-year NFNE (non-food non-energy) core inflation during the last two months

has risen to 6.4pc, which reflects the building up of inflationary pressures in the economy,” said the SBP.

The average inflation for FY18 is projected to remain within SBP’s model-based range of 3.5-4.5pc whereas the aver-

age FY19 inflation is estimated to be marginally above the annual target of 6pc, said the SBP.

“Helped by strong growth in major crops and a modest increase in livestock, agriculture sector has not only record-

ed a notable improvement over the last year but also surpassed the annual growth target of 3.5pc per cent,” the

central bank noted.

Meanwhile, industrial sector grew by 5.8pc, primarily because of vibrant construction activity and notable improve-

ment in large-scale manufacturing.

08



These gains in the commodity-producing sector along with growing aggregate demand have pushed the growth in

services to 6.4pc, said the SBP.

Keeping in view this strong growth momentum and the upcoming investments in auto and construction allied indus-

tries, the government has set the real GDP growth target of 6.2pc for FY19.

“The assessment of overall macroeconomic picture suggests that this target is ambitious and would critically depend

on managing the growing pressures on the external account while ensuring that average inflation is contained close

to its target in FY19,” said the SBP.

On the external front, the current account deficit widened to $14bn during the first 10 months of FY18, which is 1.5

times the level of deficit realised during the same period last year.

“Despite a strong recovery in exports (year-on-year increase of 13.3pc during July-April period of 2017-18) and a

moderate increase in workers’ remittances (a growth of 3.9pc), the growing imports to support higher economic

activity and the sharp increase in oil prices have pushed the current account deficit to a higher level,” observed the

SBP.

In the absence of sufficient projected financial flows, a portion of this higher current account deficit was managed

by using country’s own resources during FY18. Consequently, the SBP’s liquid foreign exchange reserves saw a net

reduction of $5.8bn to $10.3bn as of May 18.

Reflecting the increasing pressures in the external sector, the rupee has depreciated by 9.3pc against the US dollar

till May 24, said the SBP.

“The near-term sustainability of prevailing higher current account deficit critically depends on the realisation and

further mobilisation of financial flows. The need for deep-rooted structural reforms to improve the country’s com-

petitiveness can hardly be overemphasised for medium- to long-term sustainability of balance of payments,” re-

marked the SBP.

Lawmakers add mild amendments in Finance Act 2018

“The PML-N government in its last budget agreed to introduce only 19 amendments to the Finance Act 2018, with

most of them relating to income tax measures.

Of all the recommendations, 12 are related to income tax measures, four to sales tax and three to federal excise du-

ty. These amendments will come into effect from July 1. However, revised rates of excise duty on cement and ciga-

rettes will come into effect on the next day of assent given by President Mamnoon Husain.

Through the act, the excise rate on cement was further revised from Rs1.25 to Rs1.5 per kg and on all three tiers of

cigarettes by Rs6. However, the health levy on tobacco at Rs10 per kg has been withdrawn through the act.

08



In the Finance Bill 2018, government introduced 104 amendments in income tax, 33 in sales tax and federal excise

duty.

The inclusion of meagre amendments in the bill shows either lesser acceptance of the recommendations of senators

and members of national assembly or it may also show the uninterested input given on the budget proposals.

Through the finance act, government introduced five-year plan to reduce rates for small companies in line with re-

ductions for companies. It was decided to bring down rates from 24pc to 20pc by 2023. This decrease will be carried

out by 1 percentage point each year, starting from 2019 when tax rate will be 24pc.

Slight changes were made in the tax slabs of individuals — salaried and non-salaried individuals. To remove the

anomaly, the act has included a provision that all amounts exceeding Rs800,000 be taxed a minimum at Rs2,000.

Instead of enjoying zero tax, a nominal sum of Rs1,000 for individuals in the income brackets ranging from

Rs400,001 to Rs800,000 and Rs2000 for individuals in income brackets from Rs800,001 to Rs1.2 million has been

introduced through the Finance Act, 2018.

As per changes in the tax slabs, people earning Rs50,000 per month will have a net benefit of Rs6,000, while those

earning Rs100,000 will save Rs59,500. In the case of even higher incomes starting from Rs1m per month, tax liabili-

ties will go down by Rs2m per annum — a tax break that can go as high as Rs18.8m if earnings cross Rs8m per

month.

Late filers of income tax returns will not be selected for audit automatically. To discourage late filing, the person

would not be added in the active taxpayers’ list even after filing of the return. However, this will apply from tax year

2018 onwards for which the first active taxpayers’ list is to be issued on the first day of March 2019. Any person who

has filed return for TY17 but did not file or was late, will remain in active taxpayers list for TY18 until February 28,

2019.

To make slight changes in restrictions on non-filers for registration of motor vehicles, and immovable property, the

act clarifies that in case of imported vehicles, the restriction will apply on the first registration only. It may be regis-

tered to non-filers subsequently.

It was further clarified in the act that limitation on registration of immovable property will be applied to properties

having value over Rs5m.

Through the act, tax collected at the import stage from commercial importers has been made minimum tax. It has

provided that minimum tax shall be 5pc of the import value as increased by customs duty, sales tax and federal ex-

cise duty.

Moreover, the reduced rate of 1pc for filers and 1.5pc for non-filers for designated buyers of LNG to import the fuel

on behalf of government has been made available to every person importing LNG. The anomaly in the super tax

over the gradual reduction was clarified.

08



In the act, the income from donation was exempted from income tax of Sardar Trust Eye hospital, Lahore, Habib

Univer-sity Foundation, Begum Akhtar Rukhsana Memorial Trust Hospital, Al-Khidmat Foundation, Dawat-e-Islami

Trust.

The exemption on income from export of computer software, IT services or IT-enabled services has been extended

to June 30, 2025 from June 30, 2019. The income deriving from film making was enhanced to 70pc from 50pc. The

tax payable on profits and gains derived by a person from low-cost housing projects has been brought down to

50pc.

The changes introduced in all three taxes, the recovery of tax payable by a taxpayer in connection with any dispute

for which the alternate dispute resolution committee (ADRC) has been formed will be stayed up to the date of deci-

sion by ADRC.

Through the Finance Act, the scope of taxation of resident person was further extended by including income

attributable to a controlled foreign company. The act has further clarified that the attributable income of a con-

trolled foreign entity shall be taxed at the rates applicable on dividend income as provided in Division III, Part I of

First Schedule.

Moreover, in case tax has been paid by the resident person on the income attributable to controlled foreign compa-

ny and in a subsequent tax year the resident person receives dividend distributed by the controlled foreign compa-

ny, after deduction of tax on dividend, the resident person shall be allowed a tax credit.

Through the act, the power to exempt sales tax was withdrawn from federal minister in charge and vested the same

to federal government. The import of micro feeder equipment and fish babies/seedlings has been exempted from

sales tax. The supply of match boxes was also exempted from the sales tax.

On the import and supply of potassium chlorate, a sales tax rate of 17pc along with Rs40 per kg was imposed. How-

ever, the rate of Rs40 per kg will not apply on imports made by and supplies made to organisations under the con-

trol of Ministry of Defence.

The rate of sales tax was reduced to 10pc on rock phosphate if imported by fertiliser manufacturers for use in its

manufacturing.

09

Urdu Glossary

◊ May2018 IFMP Newsletter ◊

Facility سہولت

Federal ی وفاق

Finalize حتیمیشکلیدیں

Financing رسمایهیلگانای

Fiscal ی مالیات

Fixed profit مقررہیمنافع

Foreign exchange یملیکیزریمبادلہ غیر

Foreign trade یملیکیتجارت غیر

Forfeiture فارغ

Format شکل

Forward contract یمعاہدہے آگ

Foundation بنیاد

Freedom of expression اظہارییکیآزادی

Functions افعال

10

Quotes and Jokes


11

Markets in Review


◊ Monthly Review ◊

Crude Oil

(WTI)$

Beginning 68.56

Ending 68.14

Change -0.42

KIBOR

(6 Months)

Bid % Offer %

Beginning 6.26 6.51

Ending 6.64 6.89

Change 0.38

Pakistan

Stock

Exchange

100 Index

Beginning 45,488.86

Ending 42,846.64

Change -2,642.22

Gold

10 Grams

Beginning Rs. 50,442

Ending Rs. 49,425

Change Rs. -1,017

Silver

10 Grams

Beginning Rs. 651

Ending Rs. 660

Change Rs. 9.0

Foreign Exchange Rates

Interbank Market

GBP (£) EURO (€) USD ($)

Beginning Rs. 157.37 Rs. 140.36 Rs. 115.70

Ending Rs. 154.01 Rs. 134.58 Rs. 115.65

Change Rs. –3.36 Rs. -5.78 Rs. -0.05

Contact Us

www.ifmp.org.pk 92 (21) 34540843-44 [email protected]

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