Acquiring shares of securities exchange: Criteria for strategic investors proposed

The Securities and Exchange Commission of Pakistan (SECP) has proposed minimum criteria for strategic investors desirous of acquiring the shares of a securities exchange in Pakistan. According to the draft Securities Exchanges (Licensing and Operations) Regulations, 2016 issued by the SECP here on Thursday, the SECP has issued criteria for strategic investor, anchor investor and eligible financial institutions. A strategic investor desirous of acquiring the shares of a securities exchange shall fulfil the following minimum criteria:
In the case of a securities exchange or a futures exchange, it is licensed or registered as a securities exchange or a futures exchange. Provided that in the case of a securities exchange, the companies listed on the securities exchange have a total market capitalisation of at least five times of the total market capitalisation of companies listed on the securities exchange, shares of which it is desirous of acquiring; has a net equity equivalent to at least Rs 20 billion; has experience of at least five years as a demutualized exchange; is in operation since last ten years; has profit after tax in at least three of the last five years as per the audited financial statements; has a diverse range of actively traded products which may include futures, options and other internationally acceptable- derivative instruments recognised by the Commission for this purpose; has a robust risk management system and default handling mechanism and good track record of handling market settlements; and has been provided such classification by an international index provider as acceptable by the Commission for this purpose.
In the case of a central depository or a clearing house, it is licensed or registered as a central depository or a clearing house in the country in which it operates; has a net equity equivalent to at least Rs 20 billion or is a wholly owned subsidiary of a securities exchange which fulfils the criteria mentioned in sub-regulation 9(1)(i) above; has for, at least the past five years, been associated with a securities exchange or a futures exchange which fulfils the criteria mentioned in sup-regulation 9(1) (i) above; and has profit after tax in at least three of the last five years as per the audited financial statements.
A strategic investor desirous of acquiring the shares of a securities exchange shall has sufficient operational and technical resources to assist in the development and promotion of the securities' exchange shares of which it is desirous of acquiring; it is not a connected person of the TRE certificate holder(s) of the securities exchange shares of which it is desirous of acquiring; and any other Condition as may be specified by the Commission.
A financial institution desirous of acquiring shares of a securities exchange shall fulfil the following minimum criteria: The financial institution or any of its sponsors or directors are not associated person(s) of aTRE certificate holder or any of its sponsors or directors; it complies with the capital requirements specified under the relevant provisions of applicable laws; its sponsors and directors are in compliance with the "fit and proper" criteria as provided in Annexure-l of these regulations; it has a minimum long-term credit rating as may be determined by the Commission from time to time; its license for providing any financial services has not been suspended or cancelled by any regulatory authority during the last five years; no investigation or enquiry conducted under the relevant laws has been concluded against it by the State Bank of Pakistan, National Accountability Bureau, Federal Investigation Agency or any other regulatory or government body, with all any adverse findings; an order restraining, prohibiting or debarring it from providing any financial services has not been passed by any regulatory authority, government body or agency or a court of law and it bas not defaulted ill payment of taxes.