President Asif Ali Zardari today gave assent to the Stock Exchanges (Corporatization, Demutualization and Integration) Act, 2012 to further strengthen the country’s stock markets, in a ceremony in the Presidency that was witnessed by among others by Dr. Abdul Hafeez Sheikh, Minister for Finance and Economic Affairs, Ms. Fauzia Wahab, Chairperson, NA Standing Committee on Finance, Muhammad Ali, Chairman Securities and Exchange Commission of Pakistan, Imtiaz Haider, Commissioner SECP, Muneer Kamal, Chairman, Karachi Stock Exchange, Muhammad Rahid Zahir, Chairman, Islamabad Stock Exchange, Mr. Nadeem Naqvi, Mian Ayaz Afzal, Mr. Aqeel Karim Dhadhey, Mr. Ali Ansari, Ms. Musarat Jabeen, Imran Inayat Butt, Secretary to President Malik Asif Hayat and other senior officials.
Spokesperson Senator Farhatullah Babar said that the Demutualization bill was earlier approved in a joint session of the Parliament on March 27, 2012 and enacted into law by the President signing it today. He said that the law requires the stock exchanges to be demutualized within 119 days of its promulgation in accordance with timelines specified for completion of various milestones involved in the demutualization exercise. Giving background he said that at present the Pakistani stock exchanges are operating as non-profit companies with a mutualized structure wherein the members have the ownership as well as trading rights. This structure inherently creates conflict of interest as members predominantly control the affairs of the stock exchange which results in lack of transparency in the operations of the stock exchange and compromises investors’ interest.
Also, due to lack of resources the stock exchanges have not been able to grow to the expectations of investors as trading activity is mostly concentrated in three buildings of these exchanges with the dominant share going to the Karachi Stock Exchange, he said. He said that the Corporatization and demutualization of stock exchanges would entail converting the stock exchanges’ structure from non-profit, mutually owned organization to for-profit entities owned by shareholders. Demutualization would result in increased transparency at the stock exchanges and greater balance between interests of various stakeholders by clear segregation of commercial and regulatory functions and separation of trading rights and ownership rights, he said.
The Spokesperson said that demutualization is a well-established global trend and almost all stock exchanges worldwide operate in demutualized set up. The enactment of this law will bring the Pakistani capital market on par with other international jurisdictions like India, Malaysia, Singapore, USA, UK, Germany, Australia, Hong Kong and Turkey among others, he said. The new law will help expand market outreach, attract new investors, improve liquidity and enable the stock exchange to attract international strategic partners. Demutualization will also facilitate consolidation of brokers leading to financially strong entities, he said.
The development of this law depicts the Governments commitment towards promoting development of Pakistani capital market and its trust reposed in the stock market for continued growth of the economy. The Demutualization law provides a framework for the corporatization, demutualization and integration of the stock exchanges and had been drafted after consensus with all the stakeholders. Farhatullah Babar said that apart from demutualization of stock exchanges, to make our capital market vibrant the government is revamping the Capital Gain Tax regime whereby calculation and deduction is being centralized and automated within the existing parameters of the CGT. He said that the revamped regime would not only address issues faced by the capital market but would also help in documenting the economy that would result in broadening the tax base and ensuring 100% coverage of all the taxable transactions in securities market while attracting foreign portfolio investment in the country.
A day in life of Pakistan’s president
