The Securities and Exchange Commission of Pakistan (SECP) has said that the integration of stock exchanges will increase liquidity and bring depth in the market which will facilitate government to successfully execute ongoing privatisation deals earmarked to be done through the stock market. According to SRO 21(1)/2016 issued by the SECP here on Wednesday, the commission has published the Order, dated 11th January, 2016 passed by the Commission in the matter of Integration of Karachi Stock Exchange Limited, Lahore Stock Exchange Limited and Islamabad Stock Exchange Limited.
The SECP order said that additionally, higher turnover is expected which would lead to increased tax revenue under different heads. On a long term basis an integrated stock exchange with brokers present throughout the length and width of the country will act as a catalyst to increase savings and channel these to investments for economic development. Furthermore, with the approval of the Act by the Parliament, the government intended to provide the stock exchanges with a framework for integration to smaller and/or non-performing stock exchanges an opportunity to grow or exit.
The SECP said that although employed in a highly specialised industry, employees of the transferor stock exchanges concerned with the undertaking were limited in terms of exposure to the stock exchange business activities. This inhibited their ability to acquire the unique capital market expertise and potential in comparison to being employed at a much more active and liquid stock exchange. The successor stock exchange, being a more liquid and vibrant market having greater focus on its stock exchange business would enable such employees to enter into mainstream activities and acquire specialist skills and expertise enabling better marketability, reputation, exposure and career progression.
Integration is expected to play a critical role in attracting strategic investors for development of the stock exchange and the capital market. Strategic investment will also enable technological partnerships with international counterparts of good repute. It is further expected to result in improved image building of our capital market and should assist in projecting a strong case for Pakistan for reclassification at the Morgan Stanley Capital International (MSCI), the global benchmark providers, which has included Pakistan in the upcoming 2016 Annual Market, Classification Review for potential reclassification to MSCI Emerging Markets (EM). The reclassification will assist in enhanced inflow of foreign institutional investment in the country
The Commission expects that post Integration the successor stock exchange will take additional measures for improved governance having national level representation on its board of directors; transparency and investor protection. It must strive to comply with all relevant principles of International Organisation of Securities Commissions set to protect investors, to ensure fair, efficient and transparent securities market's and to reduce systemic risk. Emphasis should therefore also be on enhancing the capacity of successor stock exchange for introducing new products and market development reforms, coupled with investor education and building market outreach, SECP order added.
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