LSE MD criticises PMEX, calls for parallel spot commodity exchange

Says exchange has failed to attract investment in farm produce.


Our Correspondent September 08, 2012

LAHORE:


The Government of Pakistan should either subject the Pakistan Mercantile Exchange (PMEX) to the control of all three stocks exchanges in the country, or allow setting up of a spot commodity exchange for the trading of agriculture produce, Lahore Stock Exchange (LSE) Managing Director Aftab Ahmad Chaudhry has said.


Chaudhry, while speaking at a press conference on Friday, said that the Pakistan Mercantile Exchange has failed to attract investors in trading agricultural produce like wheat and rice, as most of the trading at the PMEX takes place in minerals, like gold and crude oil. The potential in the agricultural sector does not reflect in the country’s mercantile exchange, and the proposed spot commodity exchange will help achieve this objective, he said.

He was of the view that the proposed exchange should be a subordinate organisation of the Karachi Stock Exchange, the Lahore Stock Exchange and the Islamabad Stock Exchange. He further said that management control of the proposed exchange should be given to all three stock exchanges, if they succeed in managing 40% of its share.

He maintained that the exchange will help provide maximum prices to farmers, besides eliminating the role of middlemen. Moreover, informal lending in the agricultural sector could be brought in to the banking channel, he said.

“The competitive position of the Lahore Stock Exchange now depends upon the agricultural sector,” he added.

Chaudhry said that the government should also procure its wheat stock from the spot commodity exchange to ensure food security. “We want the building of international standard warehouses for maintaining stocks across the country; meanwhile, farmers should have the facility of disposing their produce at their door-steps at spot rates with the exchange’s mobile trading units,” he added.

He further said that LSE has been completely demutualised from September 4, and the rights of members and owners have been separated. New memberships will now be invited to expand the exchange’s base, for which aspiring members will have to pay a membership fee amounting to Rs2.5 million, besides depositing Rs7.5 million.

He also complained that the present system needs significant reforming to ensure transparency in financial matters and protect investors. “Brokers should not be involved in cash and security handling, and their role should be restricted solely to an executor’s,” he said in this regard. “The LSE will either accept the responsibility of cash and security handling itself, or ask banks to do so,” he added. “The Securities and Exchange Commission of Pakistan is being asked to take steps in this regard.”

Responding a question regarding poor trading volumes at the LSE, Chaudhry said most of the investors prefer trading at the Karachi Stock Exchange. “However, we are taking different steps in this regard, and are going to link all trading terminals with the LSE,” he said.

Published in The Express Tribune, September 8th, 2012. 

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