The Securities and Exchange Commission of Pakistan (SECP)
has decided to establish a National Stock Exchange (NSE). The NSE which
will be operational by June 2004 would replace the existing three
mutualized bourses at Karachi, Lahore and Islamabad.
Dr. Tariq Hassan, Chairman SECP who informed newsmen
of this important decision at a press briefing in Islamabad last week
said an expert committee on demutualisation is being setup to prepare
NSE structure. Dr. Tariq who was accompanied by all the four
Commissioners of the SECP also informed the newsmen that the National
Commodity Exchange will also be in operation soon. Replying to a
question about the Electronic Communication Network (ECN) as the 4th
Stock Exchange — the license for which was granted by the SECP early
last year, the SECP Chairman said that the matter is under litigation.
He said, "although the matter is subjudice, we are continuing our
efforts for completing the demutualisation process. We hope that in the
next couple of months the case of ECN will also be decided by the Sindh
About the National Stock Exchange, Dr. Tariq Hassan
said that the Commission would take along all the stakeholders in regard
to the creation of NSE, but would take a final decision in the light of
what was considered best for the stock market.
Referring to the action initiated by the SECP against
fraudulent foreign exchange companies, he said a Financial Crime Wing
had recently been set up at the Commission, which would institute a
probe whenever a systemic or large scale irregularity was detected.
Whenever considered necessary, such cases would be referred to the
relevant agencies of the government for further legal action, he added.
Dr. Hassan urged the newsmen to advise the general
public to send their claims to the National Accountability Bureau in
their own interest against the companies that were being investigated
there. In this regard, he said, the SECP was in touch with the State
Bank which had assured its full coorperation in curbing white-collar
crimes or violations of the relevant laws
When asked about the possibility of replacing Badla
(carry-over transactions), he said the SECP was framing rules on margin
financing, which were expected to be enforced fully by next June.
Referring to the developments in the stock market,
the SECP Chairman observed that the KSE 100 index had touched the
highest over recorded level of 4,606 points on Sept 12, 2003 with the
market capitalization having reached the level of Rs1,021 billion.
After the listing of OGDCL, market capitalization was
expected to cross $20 million, he said. "We are pleased to note
that not only has the OGDCL issue increased the depth of the market, it
also enhanced the retail investors manifold. Nearly 150,000 investors
had applied for the purchase of shares, out of which more than 100,000
are retail investors."
Terming this a strong indication of the restoration
of investors' confidence in the capital market, Dr. Hassan pointed to
the far-reaching reforms the SECP had introduced.
"The phenomenal success of OGDCL IPO is a clear
indication that we are on the right track," he remarked, noting
that the two entities from which the government had decided to offload
its interest through the stock exchanges — NBP and OGDCL — had both
been well received by investors.
While these had paved the way for future
privatization projects, formal listing of OGDCL was expected to add
depth to the capital market and increase the market capitalization,
approximately by $3 billion. The success of the IPO was particularly
beneficial for retail investors as the shares were already being traded
at a premium, he added.
The fact that subscription offers had been received
from individuals from all walks of life had brought home the message
that the exchanges should increase their efforts to make optimum use of
technology in order to expand the investor base, which had been
restricted in the three major cities, he remarked.
Answering a question about his move to restructure
the SECP, Dr. Hassan said his objectives were three-fold: (1)
To institutionalize the reforms already carried out by the SECP; (2)
to increase efficiency; and (3)
to streamline its functioning in the light of tremendously expanded role
since 1997 when the SECP act was passed by the parliament. Regulation of
insurance industry, non-banking finance companies, etc., had since been
made the responsibility of the SECP, he pointed out.
It may be noted that all the three stock exchanges in
Pakistan are mutual organisations and their demutualision was under
consideration since long. The role of the apex registrar of the
Securities is undertaken by the SECP which stock exchanges being the
front line regulators. The SECP is duly bound to regulate stock market
for the benefit and protection of investing public and to ensure that
Securities market is being run in an efficient and transparent manner.
The mutually-owned exchanges have by now served their goals and the
market are now recognizing that modern Corporate Structures and
governance are essential for attracting fresh capital and investors.
Demutualisation takes away management away from ownership and provides
transparency under professional management enhancing market integrity
and investor confidence. Out of 52 stock exchange functioning around the
world 44 have already been demutualised. The remaining including
Pakistan are heading fast towards that direction.
The National Commodity Exchange Limited (NCEL) was
registered by the SECP last year. NCEL which provide a market place for
bringing together buyers and sellers of commodities are quite common in
the world. In Pakistan, it will be a new experience. Under its licence
the NCEL may deal in futures contract in wheat, rice and cotton seed
cakes with prior approved of the SECP for each commodity. As regards
gold, it is an internation product with a will developed market.
The NCEL — the country's first future bourse to
trade in commodities has recently become active as it has bought Hayatt
Regency Hotel building in Karachi by offering the highest during its
sale & bidding by Privatisation Commission.