The Securities and Exchange Commission of Pakistan (SECP) has proposed introducing a Swing Pricing mechanism for mutual funds, aiming to change how transaction-related costs are distributed among investors.

The regulator has issued a consultation paper and invited feedback from market participants before finalizing the framework.

According to the SECP, mutual funds often face heavy buying or selling pressure during periods of market volatility triggered by economic or political developments. Large inflows or sudden withdrawals force fund managers to rapidly trade assets, resulting in additional expenses such as brokerage fees and transaction costs.

Under the current system, these costs are absorbed by the entire investor base, including individuals who neither invested nor withdrew funds during such periods. Regulators say this practice can reduce returns for long-term investors.

The proposed Swing Pricing model seeks to address this issue by shifting the impact of these transaction costs toward investors whose large or frequent trades create the additional expenses. The adjustment would be reflected in the fund’s pricing during periods of significant inflows or outflows.

SECP believes the mechanism could improve fairness among investors, enhance transparency in mutual fund operations, and help stabilize funds during market stress. The proposal also aims to align Pakistan’s asset management framework with international regulatory practices.

Stakeholders, including asset management companies, investors, and industry experts, have been asked to submit comments before the proposal moves toward implementation.