April 03, 2008	Thursday	Rabi-ul-Awwal 25, 1429

ISLAMABAD, April 2: President Pervez Musharraf has refused to sign an ordinance to avoid a fresh controversy.

Sources told Dawn that the president had sent the draft Stock Exchanges (Corporatisation, Demutualisation and Integration) Ordinance, 2007 back to be tabled in parliament.

After years of delay, the caretaker cabinet had approved the draft on Jan 24 and was expecting the president to sign it within 10 days.

But an early criticism over the unnecessary haste bypassing parliament and the very authority of a caretaker cabinet to approve a law had created doubts over its intentions.

The sources told Dawn that Finance Minister Ishaq Dar would have challenged the ordinance. They said that some changes in the draft were likely to be made once it was brought to parliament.

According to a statement issued by the Securities Exchange Commission of Pakistan, demutualisation refers to the transformation of the stock exchanges from a not-for-profit concern limited by guarantee to a shareholder owned for-profit entity where members, investors and the general public will be able to buy and sell shares of different bourses.

The ordinance provides for the 40 per cent of the shares to be retained by the existing members, 20 per cent to be issued to the general public through an initial public offer and the remaining 40 per cent to be sold to a set of strategic international investors such as global stock exchanges and or financial institutions.

Demutualisation allows a bourse to become a partner with a strategic international investor who is recognised as a market leader in offering a fair, transparent and efficient securities market.

A stock market will thus be able to benefit from a transfer of technology and products that are yet to be introduced in Pakistan’s nascent capital markets. The involvement of a global strategic investor will help add credibility to the Pakistani capital markets-thereby facilitating the entrance of new participants into the market.

A demutualised exchange would ensure that the exchange would not work in the interest of members only, but for all market participants and remove any doubts amongst critics. It would enable the exchange to raise capital, expand and improve its operations. Its conversion from a not-for-profit concern to a for-profit concern creates an incentive for the exchange to employ more cost effective and efficient ways to operate.

The SECP was busy till last week arranging seminars on the benefits of the ordinance in different parts of the country.