ISLAMABAD, Feb 19: Acting Chairman, Securities and Exchange Commission, Mr Abdul Rehman Qureshi has taken a strong exception to the manner in which some brokers are attacking the SECP’s decision to register the first ECN to function as self-regulatory stock exchange.

“I do not expect the professional people like Feroz H. Cassim and Arif Habib, etc., to behave in the manner they had behaved over a decision taken by the SECP as a regulator and quasi-judicial forum,” he remarked while talking to this correspondent here on Wednesday.

The commission, he said, had asked them both personally and at public forums to demutualize the stock exchanges and establish ECN in line with the international trends. When a company (Pex Ltd) did come forward with the proposal, the commission held a public hearing to which all the three stock exchanges were invited. The LSE represented itself through its Chairman and Managing Director and ISE through its MD while KSE too sent an official.

As professional bodies, they should have participated in the hearing fully and presented their concerns with arguments. Even now the situation was that the commission had only granted registration. Pex Limited has been given nine months to satisfy SECP that they fulfil all the conditionalities to function as an ECN and stock exchange as regards all the relevant matters including pattern of shareholding, composition of board of directors, economic viability, etc.

During the hearing, he further stated, the promoters of Pex Limited had offered to associate the stock exchanges, brokers, investment banks and other capital market entities. “Thus the stock exchanges and their members have ample time to do their homework, carry out research and negotiate with Pex Limited with regard to their role in the new stock exchange,” he said.

Approached by this Correspondent, the President of Islamabad Stock Exchange, Ch. Mohammad Sharif said he had no objection to the institution of an ECN but added that he failed to understand the modality for establishment of a fourth stock exchange.

This matter, he contended, had not been explained by the Commission at all the levels. Citing Section 4 of Securities & Exchange Ordinance, 1969, he said, it was the SECP’s duty to satisfy itself before granting its approval and not wait for its possible collapse after its establishment.

Expressing his doubts about its economic viability, the ISE Chairman argued that the stock market in Pakistan was worth only Rs10bn as against the market capitalization of Bombay Stock Exchange to the tune of Rs69bn.

The ISE Chairman said the concept had yet to be elaborated. The meeting of the ISE Board of Directors to be held on Feb 25 was to discuss this matter. As regards international trend, he said 2 out of 9 ECNs of New York still awaited the permission to float their own bourses requested 2 years ago.

Mr. Sharif, nevertheless, appreciated the achievements of Mirza. “If he had continued, he might have been able to elaborate and implement the concept in his mind,” he added.

A capital market expert with substantial experience in regulatory matters, said on condition of anonymity that ECN was a concept meant to provide an efficient and transparent trading system. He considered the SECP’s decision a timely move because the advance of technology could render the geographical boundaries obsolete, enabling regional bourses to replace local bourses.

In Pakistan, the stock market was inaccessible to most of the country. While stock exchanges might be unviable in Faisalabad, Sialkot, Peshawar, Hyderabad, Quetta, etc., such offices could provide the trading facilities to the prospective investors there.

In its objective of raising funds for the industry at affordable cost while protecting the investors’ interests, the performance of the stock market in Pakistan was way behind most of its counterparts in the world, he remarked.

Moreover, banks, offering credit at 8pc, now constitute a serious competitor to the stock market as the source of relatively cheap funds for the industry. It was all the more necessary that the bourses integrated into a single bourse, raising finances for the industries at reasonable cost through self-regulation, better service at reduced cost and perception of a safe haven for small investors, he added.