NATIONAL STOCK EXCHANGE
The Commission would take along all the stakeholders in regard to the creation of NSE
From SHAMIM AHMED RIZVI,
Dec 08 - 14, 2003
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 High Court."
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.