ISLAMABAD, Nov 24: The Securities and Exchange Commission of Pakistan has decided to establish by June 2004 a National Stock Exchange (NSE), which will replace the existing mutualized bourses of Pakistan, SECP chairman Dr Tariq Hassan stated here on Monday.
Talking to reporters, he said an experts’ committee on de-mutualization would be set up next month to propose the NSE structure.
All the four SECP commissioners — Abdul Rehman Qureshi, Shahid Ghaffar, Zafar Hejazi and Syed Itrat Husain Rizvi — were also present on the occasion.
In reply to a question, he said the issue of the creation of the Electronic Communication Network (ECN) as the fourth stock exchange was still under litigation. He, however, expected the matter to be resolved before long.
The commission, Dr Hassan said, would take along all the stakeholders in regard to the creation of NSE, but would take a final decision in the light of what was considered best for the stock market.
Referring to the action initiated by the SECP against fraudulent foreign exchange companies, he said a Financial Crime Wing had recently been set up at the commission, which would institute a probe whenever a systemic or large-scale irregularity was detected.
Whenever considered necessary, such cases would be referred to the relevant agencies of the government for further legal action, he added.
Dr Hassan urged reporters to advise the general public to send their claims to the National Accountability Bureau in their own interest against the companies that were being investigated there.
In this regard, he said, the SECP was in touch with the State Bank which had assured its full cooperation in curbing white-collar crimes or violations of the relevant laws.
When asked about the possibility of replacing Badla (carryover transactions), he said the SECP was framing rules on margin financing, which were expected to be enforced fully by next June.
Referring to the developments in the stock market, the SECP chairman observed that the KSE-100 index had touched the highest ever recorded level of 4,606 points on Sept 12, 2003 with the market capitalization having reached the level of Rs1,021 billion.
After the listing of OGDCL, market capitalization was expected to cross $20 million, he said. “We are pleased to note that not only has the OGDCL issue increased the depth of the market, it also enhanced the retail investors manifold. Nearly 150,000 investors had applied for the purchase of shares, out of which more than 100,000 are retail investors.”
Terming this a strong indication of the restoration of investors’ confidence in the capital market, Dr Hassan pointed to the far-reaching reforms the SECP had introduced.
“The phenomenal success of OGDCL IPO is a clear indication that we are on the right track,” he remarked, noting that the two entities from which the government had decided to offload its interest through the stock exchanges — NBP and OGDCL — had both been well received by investors.
While these had paved the way for future privatization projects, formal listing of OGDCL was expected to add depth to the capital market and increase the market capitalization, approximately, by $3 billion. The success of the IPO was particularly beneficial for retail investors as the shares were already being traded at a premium, he added.
The fact that subscription offers had been received from individuals from all walks of life had brought home the message that the exchanges should increase their efforts to make optimum use of technology in order to expand the investor-base, which had been restricted in the three major cities, he remarked.
Answering a question about his move to restructure the SECP, Dr Hassan said his objectives were three-fold: (1) To institutionalize the reforms already carried out by the SECP; (2) to increase efficiency; and (3) to streamline its functioning in the light of tremendously expanded role since 1997 when the SECP act was passed by the parliament.
Regulation of insurance industry, non-banking finance companies, etc., had since been made the responsibility of the SECP, he pointed out.