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NCEL working, a new crisis for SECP

KARACHI (February 17 2007): As if the crisis at the Karachi Stock Exchange was not enough, the Securities and Exchange Commission of Pakistan is now faced with another crisis brewing at National Commodity Exchange Limited (NCEL), with the three bourses being at loggerheads with each other and vying for its control.

A meeting is scheduled in Islamabad between the SECP and the Management/Directors of NCEL on Saturday to take stock of the situation. According to sources, the SECP has clearly told the NCEL that it would not permit it to go in operation unless its Board of Directors was reconstituted, with 50 percent independent directors, and the stock exchanges have reduced their combined stake in it to not more than 30 percent.

It was agreed at the last board meeting of NCEL to increase its Board strength to 12 from 10. Moreover, the Karachi Stock Exchange said it would reduce its directors from five to three, and Lahore and Islamabad to one each with Pak-Kuwait and ZTBL holding the other two seats.

Despite this minuted decision, Lahore and Islamabad bourses decided to send in three and two nominations, respectively, for election to the new board. In retaliation, the KSE also decided to send in five nominations. As a consequence, the nominations received by NCEL secretariat were 12, ie equal to the vacancies on he Board.

Since the last date for receipt of nominations has expired, the 12 proposed directors stand elected. NCEL management is now worried that six directors would have to resign from the board for induction of six independent directors for the exchange to go live. It has been nearly five years since the issuance of licence for the commodity exchange. KSE is insisting that LSE and ISE combined strength in the equity to be equal to KSE. To this, the other bourses have yet to agree.

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