SECP and bourses to develop models for demutualisation, integration in 15 weeks

ISLAMABAD (December 12 2004): The three stock markets and the Securities and Exchange Commission of Pakistan (SECP) have fixed a schedule of 15 weeks for developing models for demutualisation and integration. In the first ten weeks from now, the three stock markets would develop their individual models for converting their guarantee limited non-profit companies into “for profit concerns” after reviewing the global market models.

A meeting, held on Saturday, for which the press release would be issued on Monday, made it obligatory for the bourses to go for demutualisation, while the integration would be carried out only after reaching a consensus.

For integration into a single market of the country, which is globally prevalent, the benefits would go to the Lahore and Islamabad markets where the membership fee is lower than in Karachi. Karachi members were asking for more than one seat following the integration, while the initial SECP report had ruled out this option.

The demutualisation would allow the institutions, especially financial institutions, to sit on the board, after getting membership or becoming shareholders of these markets, which are likely to become listed companies or private limited companies. The deadline for developing model of demutualisation would be around February 25, and through March 31 the integration process has to be discussed by market representatives.

However, the new management of 'Karachi Stock Market' arriving in the last week of this month, the experts believe, could generate some resistance against the demutualisation process. However, the intervention of high-ups, like Prime Minister, and better yields in stock markets might help appease the key market players.

A key issue in integration is differential in value of memberships of Karachi stock market and other two markets. The worth of one membership out of 145 active members from a total of 200 in Karachi stock market is about Rs 25 to 30 million, which in Lahore and Islamabad is around Rs 20 million. Expectations emanating from the integration had inflated the prices in Lahore and Islamabad markets.

Another ongoing major reform is 'replacement of badla' trading with margin financing in total 30 bourses, which entails 95 percent of such trading. Five main badla trading shares ie PSO, Hubco, PTCL, OGDC and DG Khan Cement, would be allowed to be traded for margin financing in the final month, near the deadline of June 2005.

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