Under pressure of the international financial institutions (IFIs) the Securities and Exchange Commission of Pakistan (SECP) has notified constitution of a committee to merge the three stock exchanges that would be later offered to some strategic foreign investor.

An official source said that the matter was decided hurriedly as the Finance Ministry had earlier directed the SECP to appoint Khalid Mirza as Chairman Lahore Stock Exchange (LSE) and Moin Fudda as Chairman Islamabad Stock Exchange (ISE).

After their appointment, the Finance Ministry directed SECP to notify the constitution of the committee. SECP was instructed not to spread its terms of reference of the committee which give it 45 days to finalise its recommendations.

The government wants to avoid agitation from the members of the LSE and ISE, who would be the most affected in case the proposed merger of the three stock exchanges takes place. The government is looking at the model of Indian stock exchanges for the merger, the source said.

According to the notification issued on March 20, 2015 the committee is headed by Khalid Mirza, Chairman LSE and includes Munir Kamal, Chairman Karachi Stock Exchange (KSE) and Moin Fudda, Chairman ISE.

The committee is tasked to review the existing corporate structure of the stock exchanges in line with the requirements of the Stock Exchanges (Corporatization, Demutualization and Integration) Act 2012 (the Act). It will review progress and prospects of the exchanges in bringing in foreign strategic investment as required under the Act.

While the first crucial step in the transformation of the Pakistani capital market has been taken with the demutualization of stock exchanges, integration would be revolutionary measure that would assist in bringing the market at par with global counterparts.

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The committee shall accordingly recommend suitable scheme of integration for the stock exchanges for achieving economies of scale and liquidity.

The committee may invite professionals and market participants to obtain feedback and views and coordinate with the relevant bodies and associations to meet its overall objectives.

The committee shall submit it recommendations to the SECP within 45 days.

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