The ceremony was attended by Minister for Finance and Economic Affairs Dr Abdul Hafeez Sheikh, Chairperson National Assembly Standing Committee on Finance Fauzia Wahab, Chairman Securities and Exchange Commission of Pakistan Muhammad Ali, Commissioner SECP Imtiaz Haider, Chairman Karachi Stock Exchange Muneer Kamal, Chairman Islamabad Stock Exchange Muhammad Rahid Zahir, Nadeem Naqvi, Mian Ayaz Afzal, Aqeel Karim Dhadhey, Ali Ansari, Musarat Jabeen, Imran Inayat Butt, Secretary to President Malik Asif Hayat and other senior officials.
Spokesperson to President Senator Farhatullah Babar said the Demutualisation Bill was earlier approved in a joint session of the Parliament on March 27, and enacted into law by the President signing it on Monday. He said the law required the stock exchanges to be demutualised within 119 days of its promulgation in accordance with timelines specified for completion of various milestones involved in the demutualisation exercise. Giving background he said that at present the Pakistani stock exchanges were operating as non-profit companies with a mutualised structure wherein the members have the ownership as well as trading rights.
This structure inherently created conflict of interest as members predominantly controlled the affairs of the stock exchange which resulted in lack of transparency in the operations of the stock exchange and compromises investors' interest, he added. The spokesperson said due to lack of resources the stock exchanges had not been able to grow to the expectations of investors as trading activity was mostly concentrated in three buildings of those exchanges with the dominant share going to the Karachi Stock Exchange.
He said corporatisation and demutualisation of stock exchanges would entail converting the stock exchanges structure from non-profit, mutually owned organisation to for-profit entities owned by shareholders. Demutualisation 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 demutualisation was a well-established global trend and almost all stock exchanges worldwide operated in demutualised set up. He said the enactment of this law would bring the Pakistani capital market at par with other international jurisdictions like India, Malaysia, Singapore, US, UK, Germany, Australia, Hong Kong and Turkey among others.
He said the new law would help expand market outreach, attract new investors, improve liquidity and enable the stock exchange to attract international strategic partners. Demutualisation would also facilitate consolidation of brokers leading to financially strong entities, he said.
The spokesperson said the development of this law depicted the government's commitment towards promoting development of Pakistani capital market and its trust reposed in the stock market for continued growth of the economy. The Demutualisation law provided a framework for the corporatisation, demutualisation and integration of the stock exchanges and had been drafted after consensus with all the stakeholders.
Farhatullah Babar said, "Apart from demutualisation of stock exchanges, to make our capital market vibrant, the government is revamping the Capital Gain Tax regime whereby calculation and deduction is being centralised and automated within the existing parameters of the CGT."
He said 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 percent coverage of all the taxable transactions in securities market while attracting foreign portfolio investment in the country.