KARACHI (February 17 2003) : Majority of Karachi Stock Exchange members, including the management, wanted to annul the decision allowing opening of fourth stock exchange in the country and termed it as favouritism and contrary to the SECP plan of demutualisation of the exchanges.
Before resigning, Khalid Mirza, chairman of Securities and Exchange Commission of Pakistan (SECP) granted licence to PEX Ltd to run Pakistan's first electronic stock matching order network, or electronic trading, which would be an alternative to the existing three stock exchanges in the country.
The permission was given by the SECP's chairman Khalid Mirza at Islamabad where he told reporters on Friday that alternative trading systems, known as ECN, have become integral to modern securities markets…as well as competition to the established securities exchanges.
He said it would take a few months for PEX Ltd, the company given the regulatory authority to set up the electronic exchange, to start its operations.
The KSE is scheduled to hold a board meeting on Tuesday to debate the issue and several senior members were scheduled to meet with Shaukat Aziz, Advisor to the PM on Finance & Economic Affairs.
Firozuddin Cassim, chairman of KSE, said that the decision taken by the ongoing chairman was taken in a haste. Before taking any big decision the government and regulator usually hold debate among the participants.
“But suddenly we heard that the regulator has allowed the establishment of fourth stock exchange. We are not against the electronic communication network, but the setting up of the fourth stock exchange is contrary to the SECP's plan to modernise the working of capital market,” he said.
Cassim said that the Asian Development Bank is also against the setting up of another stock exchange; rather it deferred the government's plan to set up exchanges in Quetta and Peshawar.
He added that SECP for the last couple of months has been brain-storming the participants to merge all the exchanges into one, calling it demutualization.
Moin Fudda, Managing Director of KSE, said he had sent IT official of the KSE in the presentation as he was busy in meeting with a foreign dignitary on February 10 and he could not attend it.
A leading member of the KSE said the presentation made at the SECP was for the Electronic Communication Network (ECN) but the decision was announced for the setting up of an Electronic Stock Exchange (ESE).
He said that the step taken by the SECP's former chairman was not a transparent one and they failed to follow a proper procedure to set up a parallel exchange.
He pointed out that the in the past the former chairman and other officials had made presentations, and in their speeches promoted for ECN, not ESE.
Moreover, for the exchange to have members listed it would certainly discourage the very spirit of the present bourses.
The proposal about ESE was not made public and lacked transparency. The government, especially the Prime Minister's advisor on economic affairs, Shaukat Aziz, should intervene in this matter and abolish the setting up of the exchange.
Brokers also said that ECNs were permissible, in their view, as long as they acted as electronic brokerages, rather than separate exchanges.
“We are not against ECNs, in principle, but granting the status of a stock exchange is not understandable,” a prominent member said. “We are surprised and shocked.”
Citing the example of AKD Trade, an online trading system provided by AKD Securities, brokers said they were not against ECNs as such. However, critics have said that since human intervention is involved in the execution of trade, AKD Trade is not a truly automated system of online trading.