ISLAMABAD, April 2 President Pervez Musharraf has refused to sign an ordinance to avoid a fresh controversy.

Sources told Dawn that the president had sent the draft Stock Exchanges(Corporatisation, Demutualisation and Integration) Ordinance, 2007 backto be tabled in parliament.

After years of delay, the caretaker cabinet had approved the draft onJan 24 and was expecting the president to sign it within 10 days.

But an early criticism over the unnecessary haste bypassing parliamentand the very authority of a caretaker cabinet to approve a law hadcreated doubts over its intentions.

The sources told Dawn that Finance Minister Ishaq Dar would havechallenged the ordinance. They said that some changes in the draft werelikely to be made once it was brought to parliament.

According to a statement issued by the Securities Exchange Commissionof Pakistan, demutualisation refers to the transformation of the stockexchanges from a not-for-profit concern limited by guarantee to ashareholder owned for-profit entity where members, investors and thegeneral public will be able to buy and sell shares of different bourses.

The ordinance provides for the 40 per cent of the shares to be retainedby the existing members, 20 per cent to be issued to the general publicthrough an initial public offer and the remaining 40 per cent to besold to a set of strategic international investors such as global stockexchanges and or financial institutions.

Demutualisation allows a bourse to become a partner with a strategicinternational investor who is recognised as a market leader in offeringa fair, transparent and efficient securities market.

A stock market will thus be able to benefit from a transfer oftechnology and products that are yet to be introduced in Pakistan'snascent capital markets. The involvement of a global strategic investorwill help add credibility to the Pakistani capital markets-therebyfacilitating the entrance of new participants into the market.

A demutualised exchange would ensure that the exchange would not workin the interest of members only, but for all market participants andremove any doubts amongst critics. It would enable the exchange toraise capital, expand and improve its operations. Its conversion from anot-for-profit concern to a for-profit concern creates an incentive forthe exchange to employ more cost effective and efficient ways tooperate.

The SECP was busy till last week arranging seminars on the benefits of the ordinance in different parts of the country.