Karachi bourse: Brokers drop demand for member-chairman

Call for early approval of Security Bill 2010.

KARACHI: Brokers at the Karachi Stock Exchange have dropped their demand for the appointment of a member-chairman of the country’s premier bourse.

Sources revealed that “the demand for a broker to be appointed as chairman of the exchange had been pending on the agenda of the exchange and a meeting of brokers was called to settle the matter.”

The source said that majority of the brokers were not in favour of continuing with the demand and it was consequently dropped. The rejection has put an end to the controversy which arose more than four months ago, when dozens of KSE members signed a petition, asking the Securities and Exchange Commission of Pakistan (SECP) to remove its restriction on the appointment of a member of the exchange as chairman of the KSE board.

Unlike earlier extraordinary general meetings where this matter was discussed, Monday’s moot was not attended by prominent stalwarts of the equity market. Arif Habib Investments Director Ehsan Mehanti commented, “the first priority for all market participants is the introduction of margin financing through the Securities Bill 2010 and that is the demand of all brokers as well.”

Mehanti opined that the brokers’ decision to withdraw calls for a member-chairman will help ease tensions between the SECP and brokers, paving the way for an early implementation of the proposed bill.

Former SECP chairman Salman Siddique had asked KSE members to hold back their demand until the appointment of a new chairman at the apex regulator. Soon after his appointment, the new SECP Chairman, Muhammad Ali Ghulam Muhammad, visited the exchange at the end of December 2010. In a meeting with stock brokers which lasted several hours, he gave assurances that the apex regulator would push for an early approval of the Securities Bill 2010 with the federal law and finance ministries.

However, Muhammad shot down the request for a member-chairman at the bourse, citing potential issues of conflict of interest and transparency. Market analysts have also attributed recent bearish spell at the bourse to Monday’s meeting.

“Many participants were nervous that if the brokers persisted with their demand, it can delay the introduction of a leverage product in the market,” said an equity analyst.

He added that market sentiment will likely improve now that brokers have honed their demand in line with the requirements of the apex regulator.

Published in The Express Tribune, January 25^th, 2011.