Stock exchanges’ integration will be commercial decision: SECP

Apparently denying that there is no plan to merge the three stock exchanges, Securities and Exchange Commission of Pakistan (SECP) has confirmed that the integration will be a purely commercial decision.

A clarification issued by SECP regarding a story appearing in the Pakistan Today on April 4 about the intended merger of the three stock exchanges says that the story was not based upon facts.

The story was based upon an official notification regarding constituting of a three member committee and its terms of reference, especially integration of the stock exchanges. The story mentioned that the chairmen of Lahore Stock Exchange and Islamabad Stock Exchange were hurriedly appointed and then made members of the committee.

The clarification did not contest the constitution of committee, hurried appointment of members or the terms of reference of the committee. It only contests the use of word “merger” which is similar to meaning in “integration”. However, the clarification admits candidly, “the integration is a purely commercial decision and the SECP will not interfere in the same.”

Exactly the same information was provided by the story using the term “merger” to make a more commercially viable domestic stock exchange for the strategic foreign investor. Merger of the stock exchanges is under discussion for last many months as the size of ISE and LSE is considered too small for IPOs as well as for daily trade.

A statement issued by SECP says, “This is with reference to a recent news item appearing in a section of press regarding reported merger of the stock exchanges. It is clarified that the impression created in the said news item was misleading and not based on facts.”

“Actually, the SECP in coordination with the stock exchanges is in the process of ensuring smooth implementation of requirements of the Demutualization Act. In this connection, the SECP has recently constituted a committee comprising of chairmen of the threes stock exchanges, with the broad objective of recommending the way forward in terms of infrastructure landscape of the Pakistani stock market. The committee will not recommend any action beyond or contradictory to the provisions of the Act. It is being clarified that as the apex regulator of the Pakistani capital market, the SECP would not contemplate any action which would be detrimental to the interest of the market or commercial interest of the stock exchanges.”

“Moreover, the integration of any sought is a purely commercial decision and the SECP will not interfere in the same. World over, there are various models of integration which do not necessarily require merger of two or more entities. Accordingly, a suitable course of action will be adopted by the exchanges keeping in view their commercial interest and the interest of the investing public.

It is reiterated that neither is there any pressure, whatsoever, on the SECP from the Government or any other quarters, nor is the Government under any pressure from any international financial institutions. The SECP has emphasized time and again that the Government’s business friendly policies and current favorable macroeconomic indicators provide an environment which is conducive for the development of the capital markets. The SECP realizes its important position as apex regulator of the securities market and will undertake all necessary measures for development of the market by utilizing the present investment friendly climate in the country.”