Demutualisation: Another step closer

The stock exchanges of the country have moved another step closer to demutualisation. On Monday, the SECP reported that it "has approved various documents submitted by the stock exchanges under the Stock Exchanges Corporatisation, Demutualisation and Integration Act of 2012".
Chairman SECP Muhammad Ali had earlier informed BR Research that the said documents pertained to the revaluation of assets and liabilities of the bourses, plans for segregation of commercial and regulatory functions and articles of association.
The regulator has also issued approvals for the authorised and paid-up capital, number of shares to be issued and the shares to be allotted to each member. In short, the exchanges and the SECP all appear on track to achieve the demutualisation target set for September 3, 2012.
However, the real test lies ahead. The demutualised entity would require a new investor into the bourses, and it would be best that this party should be one that has ample international experience of managing stock exchanges.
"Ideally we should get an international stock exchange of good repute, significant size and adequate expertise to invest in Pakistan," Chairman SECP told BR Research, adding that "such an entity would also be able to perform the role of an effective front line regulator, something that has been missing in the existing model".
Besides the expected improvement in regulation from within the stock exchanges, it is hoped that the new entrant may bring new trading derivatives to the bourses, along with better risk mitigation and transparency enhancing measures.
But, which international exchange operator of repute is interested in investing in the country given the constant humdrum of political and economic uncertainty; is the million dollar question.
Another development that will likely trail the approvals mentioned above is the announcement of new directors for the exchanges. In fact, the regulator has already approved names of member-directors as well as SECP-nominated directors. SECP spokesperson Shakeel Chaudhry informed, "These names will also be made public in the coming days".
The incoming directors will also have a vital role to play in taking the proposition of the local bourses to international investors. For now the question of integration of the stock exchanges has been left on the back burner by the SECP.
Apparently, reaching consensus at that level still eludes the regulator. However, the members of the stock exchanges of Karachi, Lahore and Islamabad will inevitably have to iron out their differences if they are to attract a major investor and a new age of equities trading in the country.