The Unified Trading System (UTS) of the Islamabad and Lahore Stock Exchanges has become operational, which would help reduce transaction cost, increase daily volume of scrips and help effective monitoring and surveillance of the bourses. The UTS was formally aunched by Minister of State for Finance Omar Ayub Khan at a ceremony held here on Monday.
Chairman, Securities and Exchange Commission of Pakistan (SECP), Razi-ur-Rehman Khan, Managing Director, Lahore Stock Exchange (LSE), Hamid M Imtiazi and MD, Islamabad Stock Exchange (ISE) Aftab Ahmad Chaudhry were also present.
The UTS has provided a common trading platform to the members of both exchanges by inter-linking through radio besides DSL and optic fibre as standby arrangement. The members of the two exchanges can also trade with each other through intranet.
As per agreement, the ISE members shall pay two paisa per share to the LSE counter members as access fee. It is hoped that the UTS would help in eliminating the fragmentation of the stock markets to a great extent.
Addressing the broker's community, Minister of State for Finance said that the government would seriously consider the budget proposals submitted by the stock exchanges. The Ministry of Finance and Central Board of Revenue (CBR) would review each and every budget proposal to ascertain their merits and de-merits.
The capital market reforms have restored the confidence of investors, evident from over-subscription of bonds and GDRs issued by the government. In response to better economic policies, Pakistan had achieved growth rate of 7 percent, which is to be improved further.
Omar said that continuation of policies was necessary for achieving higher growth rate. In his welcome address, MD ISE Aftab Ahmad Chaudhry said that imposition and enhancement of the capital value tax on stock trading had restrained the trading volumes in the stock markets. Heavy taxation has kept the investors away from the capital market.
He proposed that the government should reduce tax rate to attract investment, as the transaction tax and CVT had negative implications on the stock market. He highlighted the taxation issues relating to de-mutualisation and corporatisation of the stock exchanges in 2007-2008. Certain exemptions are needed in the Income Tax Ordinance 2001 and Stamp Act for timely completion of process of de-mutualisation. In this regard, stock exchanges have forwarded their proposals to the CBR for consideration.
Hamid M Imtiazi, Managing Director of LSE said that the UTS would retain the ISE and LSE trade that was accounted for KSE. The risk management system under UTS would be the same for both the exchanges, while the ISE and LSE volumes would increase from a common platform through less cost and price discounting for investors.
According to him, the levy of CVT on stock exchanges had negative impact on the stock exchanges. He proposed tax relief to companies, which were being listed on stock exchanges.
SECP Chairman Razi-ur-Rehman Khan said that the SECP's mandate was to make the capital markets more and more efficient to safeguard interests of the investors. The commission, therefore, endorsed the idea of joint trading of the two exchanges. He hoped that the UTS would be quite beneficial for the investing public.
The Chairman said that in order to monitor the stock market and make it transparent, different measures had been introduced from time to time. He said that although the maintenance of an efficient and transparent market was very onerous job, the SECP was committed to do everything for transparent market and investors' protection.
The commission has maintained data of the brokers and customers to check market manipulation. Now, the commission can access the data of buyers and sellers with the help of Unique Identification Number (UIN).
The SECP chairman advised the exchanges to open their branches at Quetta and Peshawar to meet the demands of stock investments in these areas. Later, MD ISE presented shields to the Minister of State for Finance and chairman SECP.