The demutualisation bill was earlier approved in a joint session of parliament on March 27 and enacted into law by the president at a ceremony held at the presidency on Monday.
Finance Minister Dr Abdul Hafeez Sheikh, NA Standing Committee on Finance Chairperson Fauzia Wahab, Securities and Exchange Commission of Pakistan Chairman Muhammad Ali, chairmen of Karachi and Islamabad stock exchanges and other senior officials attended the ceremony.
Speaking after the signing of the bill, the president’s spokesperson Farhatullah Babar said the law required the stock exchanges to be demutualised within 119 days of its promulgation in accordance with the timelines specified for reaching various milestones in the demutualisation exercise.
At present, the stock exchanges are operating as non-profit companies with a mutualised structure wherein members have the ownership as well as trading rights. This structure creates conflict of interest as members predominantly control the affairs of the stock exchanges which results in lack of transparency in the operations and compromises investor interest.
Also, due to lack of resources the stock exchanges have not been able to grow according to the expectations of investors as trading activity is mostly concentrated in three buildings of the exchanges with the dominant share going to the Karachi Stock Exchange.
Babar said the corporatisation and demutualisation of stock exchanges would convert them from non-profit, mutually-owned organisations to for-profit entities owned by shareholders.
Demutualisation will result in increased transparency and greater balance between interests of various stakeholders by segregation of commercial and regulatory functions and separation of trading rights and ownership rights, he said.
The spokesperson said demutualisation was a well-established global trend and almost all stock exchanges worldwide operated in a demutualised set-up. It would bring the Pakistani capital market on a par with international jurisdictions like India, Malaysia, Singapore, USA, UK, Germany, Australia, Hong Kong, Turkey and others.
The new law would help expand market outreach, attract new investors, improve liquidity and enable the stock exchange to attract international strategic partners, he said.
Published in The Express Tribune, May 8th, 2012.
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