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SECP chief suggests merger of bourses

September 07, 2012

ISLAMABAD, Sept 7: Chairman, Securities and Exchange Commission of Pakistan (SECP), Mohammad Ali, mooted the idea of a national stock exchange here on Friday by merging all the three stock exchanges for attracting strategic foreign investors.

He, however, said that in the first phase the commission would suggest merger of Lahore and Islamabad stock exchanges to enhance their trading platform.

He said that the merger was a difficult task, but option is being given to all the three stock exchanges and it is now up to the exchanges to exercise it.

It is the sole discretion of the stock exchanges to accept this option or not, he said.

Talking to newsmen, Mr Ali said: “We have asked the ISE and the LSE not to compete with each other and consolidate their energies for attracting foreign investment.”

The merger of ISE and LSE seems easy compared with merger of KSE with ISE and LSE, he maintained.

He informed that all three stock exchanges have been de-mutualised and certificates of incorporation have been issued to them.

“The demutualisation process is complete and the three stock exchanges have submitted their sealed valuations to the commission,” he added.

It was stated that after the introduction of capital market reforms, volume of trade that was 30 million to 50 million shares per day has now improved to 200 million shares per day and number of investors has also increased.

The value of shares has increased from 6.5 per cent to 8 - 8.5 percent.

The chairman informed that demutualization would lessen conflicts visible in the existing mutualized set-up where brokers enjoy rights of ownership, decision-making and trading.

It will support enhanced governance and transparency at stock exchanges and bring greater balance between interests of various stakeholders by clear segregation of commercial and regulatory functions and separation of trading rights and ownership rights.

In the post-demutualization scenario, Pakistani stock exchanges would be in a better position to attract international strategic partners and good quality issuers.

“Rather than competing with each other and utilising their energies separately, they should consolidate their energies for attracting foreign investment,” Mr Ali said.

The chairman further stated that the finance ministry has approved the capital gains tax rules and these have been vetted the ministry of law and justice. The enforcement of these rules would begin by next week.

After the enforcement of these rules, CGT would be collected on traded shares from April 27, 2012 and there would be complete automated regime of CGT collection.