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Demutualisation

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aastha
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69 views15 pages

Demutualisation

Uploaded by

aastha
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF or read online on Scribd
nd use it's services for trading, nda pted entities Ba for profit and Lax exempt ft as are not freely transferable and The se not easily available, Membership of trading jum. Such a model eminenth rey apremi y trading cards wake open outcry market smut in a Wemntnal” exchange, there are three In a of people who own the exchange, manage Muse it's services. The owners of the exchange i wily vest management in a board of directors, which suse by professional team, An entirely different sec of people use the trading platform of the exchange, Demutualised stock exchanges are generally Jor profit’ and tax paying entities. The ownership rights are freely transferable and trading rights can be acquired of surrendered in terms of transparent rules. Membership cor trading cards do not exist in such exchanges, This model significantly suits the electronic market. The model is generally referred to as an institution. The stock exchanges are required to frame and enforce rules, which may not always further the public interest and private interest ie. the interest of the trading ‘members simultaneously. Public inerest generally gets " precedence in a demutualised exchange, while in the case ‘of mutual exchange, private interest gets precedence in framing the rules. This can be attributed as one of the ‘main reasons forthe slow adoption, by mutual exchanges, ‘of the systems and practices that enhance market efficiency. They adopt them only when threatened by ‘the regulations or the competitive market forces. A is generally seen as ruthless in age it a anges an are usually iy directors consist of profesional reprencng all stockbolders they are able to act proactively and } Itallows stock exchanges to explore opeions or ofibore operations and to expand its operations into . A corporatised stock exchange particularly one with public share holding, could increase the transparency and accountability of board operations (as compared with those of mutual organisation). . A demutualised exchange with the management free to decide on operational issues, is perceived to Be effective and fair in enforcement. NO. 1, JULY - DECEMBER, 2004 and Asi on the issue of 8..No, Bxchange ihe report published, 1d ave rushing herdlike mivatuvting the market” The rowealing warned that, while a een whoehesedly embraced by gen ras some could be underestimating ne word ents involved in demutuaistion, aes il hat 80% of tock exchanges, which The sore (On tuaised were planning odo soin tad already nr 60% of the stock exchanges believed sn liston ‘vas required for them to develop er ‘exchanges, with 75% cof mutual exchanges ae hat dors remained closed to them particularly rene and merger Further, according © the vl 46% of demotualsed exchanges said the ce had lived upto their expectation tn addition, 50% of those exchanges admitted that their relations with the parties such as regulations and listed companies had become more difficult since sation. It was argued that this could be the result of a herd-like mentality of the exchanges without ‘indertaking 2 prior study or investigation of consequences of demutualisation. The survey results also indicated that many exchanges were stil ar from being ‘According to the report, stock exchanges that were satisfied after the demutualisation were those that had atleas part of their share capital publicly traded. On the other hand, chose exchanges that were not satisfied after

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