DAWN.COM

ISLAMABAD, Sept 10: The management of Islamabad Stock Exchange (ISE) has expressed its reservation regarding a merger proposal with Lahore Stock Exchange (LSE) that was floated by the Securities and Exchange Commission of Pakistan (SECP).

The ISE management maintained that establishing a single trading platform by the two stock exchanges would not be a success story. However, it favoured integration with the Karachi Stock Exchange (KSE), stating that smaller stock exchanges would benefit from higher trading there.

“In this regard, the integration of all three exchanges would be better option in view of the peculiar circumstances and small scale of economy in the country,” ISE MD Mian Ayaz Afzal said in a statement.

He added that the securities market would flourish with rapid pace if this mode is adopted in Pakistan. “Therefore ISE forces the integration of all the three exchanges of the country to form a National Market System (MNS) instead of integration with a single bourse.”

Meanwhile, an ISE official said that both ISE and LSE have limited volumes and their merger would not be able to achieve anything significant.“As a matter of fact, the ISE is better placed to attract strategic investor alone due to higher asset value and better placement of operational area,” the ISE member said.

The idea of merger between ISE and the LSE in the first phase was floated by the SECP chairman who said that it would support attract strategic investor for the demutualised stock exchanges.

Responding to the suggestion, the higher management of LSE said that in order to merge LSE and ISE and create a competitive challenge to KSE, SECP needs to implement the best price discovery and execution standards by ordering the establishment of the National Market System.

The National Market System is required as brokers of all exchanges do not establish the best price of the scrips.

MD LSE Aftab Ahmad Chaudhry had recently supported the idea of establishing a united trading platforms of all exchanges instead of having the smaller exchanges merged.

“When all exchanges are merged then all orders would be executed from the centralised liquidity pool which would mean that no investor in Pakistan would get inferior pricing for his trading orders,” he said.

However, the management of both Lahore and Islamabad stock exchanges supports the demutualisation process on the grounds that it would enhance governance and transparency at the stock exchanges and enhance the competition among the
brokerage houses which ultimately improve the performance of the stock market.