The Unique Identification Numbers (UIN) allocated to the investors of the stock exchanges is a totally secured arrangement and no one could have access to these numbers, ensuring complete security of the shares trading.
On the conclusion of the signing ceremony between the Islamabad Stock Exchange (ISE) and Lahore Stock Exchange (LSE) on Unified Trading System (UTS) on Saturday, Commissioner, Securities and Exchange Commission of Pakistan (SECP) Rashid I Malik told Business Recorder that the UIN is just like Computerised National Identity Card Number (CNIC).
The UIN is a highly secured number, which could not be leaked. The UINs are so secured that even senior officials of the SECP could not have access to these numbers. These numbers are being allocated to the investors through a credible mechanism.
The UIN system has been implemented from August 1, 2006 to ensure investor's protection and good governance in stock exchanges for greater transparency eliminating chances of manipulation, he added. Moreover, the Unified Trading System (UTS) is likely to become operational by the first week of November 2006.
Appreciating both the LSE and the ISE on Unified Trading System, the Commissioner, Securities Market Division, SECP said that the SECP would expedite the process of its approval following submission of the proposal by these two bourses. The commission would ensure speedy implementation of the system, which would provide a common trading platform for better risk minimisation and cost effective trading.
Meanwhile, the Managing Director, ISE Aftab Ahmed Chaudhary and MD, LSE Hamid M Imtiazi inked the agreement on behalf of their respective exchanges. Chairman ISE, R.A. Chughtai and Chairman LSE, Ibrar A Mumtaz were also present.
Addressing the ISE/LSE board of directors, brokers and officials of the financial institutions, the Rashid I Malik said that a strong, transparent and well regulated capital market is the need of the hour, not merely for the local investor but also for the international business.
He said that the SECP has introduced ground-breaking reforms in the fields of risk management, governance, transparency and investor protection which contributed significantly towards the development of capital market and upsurge in the investor confidence. There are a number of factors that contribute to investor confidence including market/stock broker integrity and good stock exchange governance. The reforms enhanced investor protection through improvements in transparency and good governance at the exchanges, eliminating manipulative elements.
He said the securities market of Pakistan has shown immense growth in the past few years with increasing trading volumes. However, the major share of trade volumes remained with the premier bourse ie Karachi Stock Exchange (KSE).
With the inception of UTS, it is expected that a healthy state of competition would occur as a result thereof, the securities market of the country particularly both LSE and ISE would progress.
One of the advantages of UTS would be the direct access to a larger market eliminating control issues such as custody of securities, payments etc currently being faced while trading through KSE members. It will assist in bringing back the order flow that is routed by the members of ISE and LSE to members of KSE.
The Commissioner SECP said that the UTS would envisage expanding the trade activities in the length and breadth of the country and would greatly help the promotion of capital market.
The issue of thin participation of the populace of Pakistan in the stock market due to less awareness and limited outreach would also be adequately addressed through UTS.
Above all, this system would bring more transparency and efficiency for the investors. Both the Exchanges would be in a better position to make effective monitoring and surveillance and investors' interest would be adequately protected.
Besides, both the exchanges have specially focused on the risk management at UTS, which would also be uniform for both the exchanges. This system also envisages introducing new products, which would bring diversity in the securities market. It is expected that the new trading facility would significantly increase the business volumes of LSE and ISE.
Chairman ISE, R.A. Chughtai said stock markets are fragmented because trade orders of investors entered into trading system of one exchange could not be matched with those of another, even if the security being traded was listed at all the exchanges. Since most of the trading takes place at KSE, members of the ISE and LSE would telephonically route many orders of their client-investors to members of KSE, resulting in large inter-exchange trading.
Chairman ISE explained that the fragmentation has been causing a number of problems for all stakeholders, particularly the investing public. This has reduced liquidity, affected price discovery, caused risks in custody, increased cost of trade, affected quality of execution, reduced transparency in trading, obstructed market surveillance, thereby keeping market access limited and not letting the market realise its potential. It was in this backdrop that the ISE conceived the idea for the, establishment of national market system (NMS). He said NMS aimed at technologically linking all the three markets thereby providing an efficient and transparent mechanism for the transactions of all securities at national level. However, the KSE did not come out with positive response and the same idea could not materialise.
Chughtai said that keeping in view the problem of market fragmentation, ISE and LSE decided to establish a unified trading system. It was sheer hard work, commitment and resolve of both the exchanges that made it possible to complete the groundwork for the establishment of the Unified Trading System.
He hoped that the agreement will prove a milestone in the history of the two exchanges. Chughtai appreciated the co-operation and efforts of the SECP extended to the exchanges.
Ibrar A. Mumtaz, Chairman Lahore Stock Exchange also appreciated the efforts of the steering committee for concluding the agreement in a short span of time. He was quite optimistic about the success of the unified trading system.
Asif Baig Mirza, Member LSE apprised the participants about the future implementation plan of the system. He said that the SECP would give final approval of the regulations for smooth implementation of the new system. The ISE has been engaged in the procurement of hardware for this system, while the LSE is making arrangements for the software.
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