December 25, 2002	Wednesday	Shawwal 20, 1423

KARACHI, Dec 24: The chairman, Securities and Exchange Commission of Pakistan (SECP), Khalid A. Mirza has urged managements of stock exchanges to seriously consider demutualization — the process of conversion from being non-profit, member-owned bodies to profit, shareholders-owned ordinary corporates.

He was addressing at the conclusion of a seminar on “Demutualization of Stock Exchanges”, organised by SECP here on Tuesday.

He said that demutualized exchanges are more effective in managing conflicts among market participants, ownership and trading rights are separated and the aim is to maximise residual enterprise value accruing to shareholders rather than trying to preserve the current revenue stream of members.

“The stock exchanges must seriously examine the pros and cons of demutualizing and also engage in a dialogue with the regulators in this connection,” he added.

Mirza pointed out that 44 out of 52 international stock exchanges in the world are either demutualized or in a process of doing so. Even the New York Exchange which resisted demutualization for long now has it on the anvil, he added.

He said that at least one stock exchange in Pakistan was actively considering demutualization and felt that two other should do the same.

“Whatever the decision, whether to demutualize or not, it should at least take a decision after a careful consideration and not simply an emotive response based on subjective feelings,” SECP chief observed.

He said that days have gone when stock exchanges had a proprietary value or monopoly power in which the members had interests to be protected.

“This is the age of globalization and Internet-driven technological advances that are tossing up user-pushed and demand- pushed, highly cost effective market structure that are likely to make the traditional stock exchanges irrelevant,” he added.

Earlier, director, Asian Development Bank (ADB), Dr Shamshad Akhtar in her paper on “Demutualization of Asian Stock Exchange — Critical Issues and Challenges”, said that the number of privatized or listed stock exchanges has risen to 21 by early 2002.

She dilated in details about the subject, its legal and strategic approaches adopted in the demutualization worldwide, principle benefits, regulatory challenges and responses and financial viability.

CEO of AKD Securities Ali Ansari, Haroon Sohail of SECP, managing director Lahore Stock Exchange Samir Ahmad also presented their papers about the technical aspect of the issue.—APP