KARACHI: Pakistan's capital market has officially transitioned to the Trade plus one (T+1) settlement cycle that essentially requires securities transactions to be finalized within one business day after the trade date, the Pakistan Stock Exchange (PSX) said on Tuesday.

The new settlement cycle, which reduces counterparty risk and improves capital efficiency in the exchange of funds and securities, aims to align the Pakistani capital market with international best practices.

Effective from Feb. 9, all eligible trades at the PSX are now settled on a T+1 basis, replacing the previous T+2 cycle. The transition was implemented under the guidance of the Securities and Exchange Commission of Pakistan (SECP) through close collaboration among all stakeholders, according to the PSX.

It aligns Pakistan’s capital market with leading markets such as the United States, Canada, Mexico, Argentina, Jamaica and China, which have already adopted shorter settlement cycles. Europe, the UK and Switzerland are set to follow by 2027.

"The transition to the T+1 settlement cycle brings important advantages for Pakistan’s capital market. It enables faster access to funds and securities, improving liquidity, while reducing settlement and counterparty risk through shorter exposure periods," the PSX said.

"Quicker trade finalization enhances efficiency and the reform strengthens investor confidence, particularly among institutional and foreign investors. Together, these benefits support a stronger and more resilient market aligned with global best practices."

Pakistan’s stock market has touched historic highs in recent months as broad institutional buying boosted investor confidence amid ongoing economic reforms under international lending programs. Pakistani state media reported in Jan. around 135,000 new investors had joined the PSX over the last 18 months.

SECP Chairman Dr. Kabir Ahmed Sidhu commended the PSX, the Central Depository Company and the National Clearing Company of Pakistan for the successful implementation of the T+1 settlement system.

"The reform brings Pakistan’s capital market at par with modern jurisdictions by accelerating trade settlement, reducing counterparty and market risks, and enhancing liquidity," he was quoted as saying by the PSX.

"The adoption of T+1 will strengthen investor confidence and align Pakistan’s capital market with evolving international standards and global best practices."