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Demutualization Of Stock Exchanges

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A nice presentation on introduction to Demutualization of Stock Exchanges

A nice presentation on introduction to Demutualization of Stock Exchanges

Published in: Economy & Finance, Business
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  • 1. Demutualization of Stock Exchanges
    Financial Markets and Institutions
    Iqbal
    Khawer Ali
    ZubairAslam
  • 2. What is Demutualization?
    the process of converting exchanges from nonprofit, member-owned organizations to for-profit, investor-owned corporations.
    Corporatization and IPO of the stock exchange.
    Reasons for Demutualization:
    Globalization
    Information Technology
  • 3. Benefits of Demutualization
    Rationalized Governance
    Investor Participation
    Globalization
    Resources of Capital Investment
  • 4. Challenges for Demutualized Exchanges
    Conflict of Interest
    b/w ownership and management
    Ownership Structure
    Transfer of ownership from members to non-members
    Regulatory Framework
  • 5. Demutualization Process
    Ownership Structure
    Dilution of membership by valuation of member seats.
    Legal and Company Structure
    Similar to a profit-making corporation
  • 6. Demutualization History
    First demutualized SE : Stockholm Stock Exchange (SSE), 1993, Sweden
    Followed by
    Helsinki Stock Exchange, 1995
    Copenhagen Exchange, 1996
    Amsterdam Exchange, 1997
    Australian Exchange, 1998
    Toronto, Hong Kong, London SE, 2000
    60% of WFE members demutualized by 2005
    Current Demutualization : Nairobi SE, Kenya
  • 7. Case: Hong Kong Stock Exchange (HKEx)
    Pre Merger/Demutualization Period (1999)
    The Stock Exchange of Hong Kong Limited (SEHK)
    Hong Kong Futures Exchange Limited (HKFE)
    Hong Kong Securities Clearing Company Limited (HKSCC)
    HKFE Clearing Corporation Limited (HKFECC)
    SEHK Options Clearing House Limited (SEOCH)
  • 8. Case: Hong Kong Stock Exchange (HKEx)
    Post Merger/Demutualization Period (2000)
  • 9. Case: Hong Kong Stock Exchange (HKEx)
    Post Merger/Demutualization Period
    Highest Market Price
    HK$ 18.95 > 4 times before demutualization
    P/E Ratio (based on 1999 earnings)
    35.8 times before demutualization
    Rate of Equity Listing Increased
    60 new companies listed
    852 listed companies (2002) > 693 (1999)
    64 China Incorporated, 10 Foreign
  • 10. Demutualization in Pakistan
    Initiated by Federal Govt.
    SECP’s Expert Committee on Demutualization and Integration/Transformation of Stock Exchanges
    Demutualization without Integration
    Three individual demutualized SE’s
    KSE, LSE, ISE
    The process will be completed by the end of current year.
  • 11. Conclusion / Recommendation
    KSE as individual demutualized SE.
    LSE and ISE as integrated SE
    Merger with CDC
    Better Understanding to resolve Agency Problems
  • 12. Thank You !

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