ISLAMABAD, March 28: The stock exchanges would be corporatised and demutualised in four months ending the reign of brokers by segregating the ownership and trading rights at the bourses, Securities and Exchange Commission of Pakistan Chairman Muhammad Ali said on Wednesday.

Addressing a press conference, the SECP chairman informed about the transition process after the demutualisation law is finally implemented after the presidential assent.

`The major advantage of demutualisation of stock exchanges is that the brokers would not have 100 per cent ownership rights. Once the process is complete, a certain percentage of shareholding wouldremain with the brokers. Whereas the general public and strategic investors would obtain shareholding of the stock exchanges, which would be turned into companies,` Ali said.

`The status of the stock exchanges would be changed from limited by guarantee to the public limited company. The public limited companies themselves would be listed on the stock exchanges, and ultimately segregate ownership and trading rights,` he explained. He further said that an investment bank of international repute would be appointed for evaluation of the stock exchanges after demutualisation.

Responding to a query on the merger of stock exchanges, the SECP chairman said that the merger will be the decision of stock exchanges.

`The stock exchanges desirous of integra-tion/merger or to merge into one entity will be required to submit a scheme of integration to the commission. The SECP shall have the powers to approve the scheme of integration and effectuate transfer of rights and obligations as if the scheme was approved by the court.

After demutualisation of stock exchanges, the only way to increase value of shares is by increasing profitability of the stock exchanges.

`When general public will come into the stock exchanges, the confidence of the investors will further increase and values of the shares would show further improvement,` Ali said.

He said that brokers control will also come to an end as they are required to fulfill the stringent fit and proper criteria and cannot have automatic trading rights by virtueof being member of the exchange.

The management of the stock exchanges would be able to work independently without being influenced by brokers which is a good omen for investors as well as general public, he commented.

Under the law, up to 40 per cent shares would be offered to the strategic investors and local financial institutions, general pubic would be offered 20 per cent shares and 40 per cent shares would be offered to the brokers.

Another major feature of demutualisation is that the composition of the board of directors of the stock exchanges will be changed, with the management, board and shareholders becoming independent.

After demutualisation, out of 10 directors, six directors will be nominated by the SECP from private sector whereas the remainingfour directors would be elected.

`It would bring balance among interest of different stakeholders in the corporate and governance structure of the stock exchanges,` Ali said.

`These steps to open up the stock markets would result in expanding the outreach of capital markets and would attract investors from small cities and far flung areas.` The SECP chairman hoped that the supervision and enforcement functions would become more effective after demutualisation of exchanges.

He further informed that new memberships at stock markets would not open for at least another three years after demutualisation law is enforced. `The SECP is planning to launch various categories of memberships after the period to increase participation of investors.