Stock Exchange law to make bourses more efficient: LSE managing director

The Lahore Stock Exchange Managing Director Aftab Ahmad Chaudhry has hoped that ongoing joint session of both the Houses was likely to pass the Demutualization of Stock Exchanges Act that would be part of the capital market restructuring reforms programme.
He was talking to the Lahore Economic Journalists Association's member here on Tuesday. The Act is aimed at making the local bourses more efficient and transparent to protect all the stakeholders' interest, he mentioned. Under the Act, the strength of non-member directors would be increased to 6 while there would be four member directors on the Board, he said.
Briefing about the background of this move, the LSE Managing Director said that the National Assembly had passed the Bill in 2007 but could not be approved by the Senate. However, after the 18th Amendment, all such bills which could not be approved by the Senate even after passing by the National Assembly in the past, now would be paced before the joint session of the Parliament, he added.
As soon as the Demutualization of Stock Exchanges Act takes place, all the stock exchanges would become profit making entities. These exchanges could evaluate their assets like building, software and other equipments so as enable to distribute shares equal to the assets' value among the exchange members, he said. The Act would also have a provision under which two or more exchanges can go for merger subject to the approval of the Securities and Exchange Commission of Pakistan (SECP), he added.
Aftab Ahmad Chaudhry stressed the need for restricting the members' role to ensure transparency in stock market affairs. He, however, was of the view that members could play advisory role or they could be provided representation at different committees. He suggested the formation of Capital Market Association rather than forming brokers association which would induce self regulatory measures among the members. "We are going to seek members opinion regarding the Capital Market Association in the next general body meeting so that it could be finalised by the end of this June", he revealed.
He further said that Memorandum of Article of Association of the Lahore Stock Exchange has been amended which would allow registration of criminal case against the members found in fraudulent or deceptive activities. Previously, the management had the authorities to terminate the membership of such brokers from the exchange, he maintained.
All these measures are meant for ensuring transparency to develop investors' confidence in the stock business. During the last year, the LSE management had terminated membership of seven to eight brokers who were involved in cheating the investors.
To a question regarding the ongoing energy crisis, he said that the government had control of power generation and its distribution. Because of this, neither the local nor the foreign investors made investment in energy sector, he said. Moreover, the circular debt has been increased from Rs 150 billion to Rs 700 billion during the present regime. The public sector departments were the major consumers of the electricity with 60 percent consumption but majority of them could not pay bills. As a result of their default, payments were not being made to the distribution companies and subsequently the power generating units and the oil companies. The energy shortage has not only added financial burden to the commoners but also hitting the industrial and economic activities which in turn adversely impacting the stock business in the country, he said. Aftab Ahmad Chaudhary also highlighted different steps taken by the exchange like corporate briefing and financial literacy programme to create awareness about the financial market among the young generation and investors. Meanwhile, the LSE Managing Director distributed shields among the association's members.