Commercial Issues and Potential Benefits of Demutalisation Speaker: Muhammad Munir Ladha Director, Karachi Stock Exchange September 07, 2006 “the transition from a mutual company, in which here are no shares and every member has one vote, to a company
Commercial Issues and Potential Benefits of Demutalisation
Speaker: Muhammad Munir Ladha
Director, Karachi Stock Exchange
September 07, 2006
“the transition from a mutual company, in which here are no
shares and every member has one vote, to a company
limited by shares and one vote per share.”
Strict definition is..
What is ‘demutualisation’ ?
Can also imply…
..the transformation of an exchange from an entity owned by
its members into a for profit, shareholder-owned company
A comm entity
Internationally, demutualisation has been adopted by exchanges more for resources generation to meet rising capital requirement and less for better corporate governance.
Demutualisation is considered for revamping and separating ownership control from management control in stock exchanges
In FY2002, the KSE realized a deficit of PKR 60.6mn. During the same time the KSE Index soared 32%.
Public listing of shares of the exchange would enable it to raise funds from the market subjecting it to transparency, accountability accountability and market discipline
Consolidation of bourses and clearing houses within a single entity would bring economies in terms of operational efficiencies, savings in infrastructure investments and financial strength
A Demutualised SE
Demutualisation would ensure that exchange would not work in the interest of members only, but also be responsive to market participants
A public exchange would make it possible to infuse professional mangement
(Pak Rupees Million)
The benefits of additional resources and independent and professional governance can be balanced by an efficient regulatory structure
Regulatory Implications of Demutualization
Trading: Setting rules for trading, conducitn surveillance, and enforcing the rules.
Market Manipulation : Overseeing the trading system to prevent abuses.
Membership: establishing rules to govern the conduct of members and monitoring compliance with and enforcement of rules.
Note: Not for Presentation.
Pak Rupees Million