The Securities and Exchange Commission of Pakistan (SECP) has proposed a new pricing mechanism for mutual funds aimed at improving fairness in how transaction costs are distributed among investors.
Under the proposed framework, known as “Swing Pricing,” costs arising from large inflows or withdrawals would be passed on to the investors responsible for triggering those transactions, rather than being shared across all unit holders.
The Securities and Exchange Commission of Pakistan stated that the consultation paper has been issued to seek feedback from stakeholders before finalizing the policy.
Mutual funds often face sudden buying or selling pressure during periods of market volatility caused by economic or political events. When large numbers of investors redeem or invest simultaneously, fund managers are required to quickly adjust portfolios, leading to additional expenses such as brokerage fees, transaction charges, and market impact costs.
Currently, these costs are distributed across all investors in a fund, meaning even long-term investors may indirectly bear expenses generated by short-term trading activity.
The SECP argues that this structure can dilute returns for stable, long-term investors. The proposed swing pricing system aims to correct this imbalance by allocating costs more directly to those whose transactions generate them.
The regulator has invited industry feedback as part of its consultation process before moving toward possible implementation of the new framework.
