ISLAMABAD, July 10: The Securities and Exchange Commission of Pakistan (SECP) has rejected the key documents submitted by the three bourses related to implementation of demutualisation for not meeting the desired standards.

The SECP has asked the KSE, LSE and ISE to re-devise their five-year development plans and segregation of commercial and regulatory functions.

Sources in the SECP told Dawn on Tuesday that the three bourses had highlighted their expenditures, revenue generation and other issues that they foresee in coming years.

“But we want them to foresee the future — where do the stock markets see themselves after demutualisation in five years from now,” an SECP official said. Apart from asking these bourses to resubmit their business plans, the SECP has also directed them to devise strategies after consultations with their advisors on demutualisation.

“We have guided the exchanges to work out the plans as per their standing in Pakistani market,” the official said, adding that the Islamabad Stock Exchange has to work out for new avenues and not to trail behind the equity market only.

“The ISE cannot beat the KSE in the field of equity trade, however they can look for new ventures and develop expertise in TFCs, bonds or develop specialisation to promote linkages with international stock markets,” he remarked.

The SECP has also turned back the plan for segregation of commercial and regulatory functions submitted by these bourses.

“The exchanges have maintained the current system but under the demutualised scenario the brokers will not be having the trading rights but each of them will be shareholders of the stock market,” he observed.

He added that the exchanges had failed to understand that there could be issues related with conflict of interest with demutalised exchanges especially after self listing of the exchanges.

The corporate sector regulator has asked the stock markets to resubmit the revised documents as early as possible as the timeline for the implementation of the demutualisation of stock markets nears and the SECP seems to be under stress as July 21, 2012 is the date set for the approval of these documents.

August 20, 2012 is the deadline for action by the stock exchanges over the documents approved by the SECP and September 3, 2012 has been set as the final date for corportisation and demutualisation of bourses.

In a recent SECP Chairman Muhammad Ali strongly stressed for following the timeline and called upon the concerned officials to regularly issue notices to the exchanges that were failing to submit their required documents.

However, the new challenge being faced by the SECP is that the managements of three bourses have demanded more guidelines regarding segregation of regulatory and commercial functions which might take time for the completion of documentation.