August 28, 2006	Monday	Sha'aban 3, 1427

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ISLAMABAD, Aug 27: In order to provide a common trading platform for better price discovery, risk rationalisation and cost trading, Islamabad and Lahore stock exchanges have entered into an agreement for the establishment of Unified Trading System (UTS).

In this context an agreement signing ceremony was held on Saturday, stated an official announcement issued here on Sunday.

Speaking on the occasion, president Islamabad Stock Exchange (ISE), R A Chughtai, said that Pakistan stock market has been giving exceptional returns to the investors due to economic growth and reforms carried out in the stock market. However, the fundamental structural problem of the market fragmentation which was being faced by the stock market since long remained unaddressed.

He said that Pakistani stock markets were fragmented because trade orders of investors entered into trading system of one exchange could not be matched with those entered at another exchange, even if the security being traded was listed at all exchanges.

Since most of the trading took place at Karachi Stock Exchange, he added, members of Islamabad and Lahore stock exchanges would telephonically wrote many orders of the client- investors to members of the KSE resulting in large inter-exchange trading.

Mr Chughtai explained that the fragmentation has been causing a number of problems for all stakeholders, particularly the public investor. This had reduced liquidity, affected price discovery, caused risk in custody, increased cost of trade, affected quality of execution, reduced transparency in trading, obstructed market surveillance, thereby keeping market access limited and not letting the market realise its potential.

It was in this backdrop, he said, that the ISE conceived the idea of the establishment of National Market System (NMS) in this country. The NMS was aimed at linking all the three markets technologically and by that providing an efficient and transparent mechanism. However, the KSE did not come out with positive response and the NMS idea could not be materialised.

Mr Chughtai said that keeping in view the problem of market fragmentation, ISE and LSE decided to establish a unified trading system. It was the sheer hard work, commitment and resolve of both the exchanges that made it possible to complete the groundwork for the establishment of the UTS. He hoped that the agreement will prove a milestone in the history of the two exchanges.

He also appreciated the cooperation and efforts of the Securities and Exchange Commission of Pakistan (SECP) extended to the exchanges.