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Brokers seek clarification on NSE demutualisation

By on April 14, 2011

Market operators have sought a clarification of the planned demutualisation process of the stock market.

Demutualisation of the stock exchange transforms the market from a member-owned company to a shareholder-owned exchange, moving it from private to public ownership.

Speaking with our correspondent on the development, the Managing Director, Dependable Securities Limited, Mr. Chinenyem Anyanwu, said that operators of the exchange were not against demutualisation, but expected that due process would be followed in the exercise.

He said, “The papers wrote that we were against it but I don’t think that is the matter; brokers are not particularly against it. We are seeking certain clarification in the way to the demutualisation. There are certain things that need to be put in place. If you are demutualising the stock exchange, the procedure for demutualising stock exchange is like the procedure in other kinds of quoting on the exchange.

“You will call a meeting of the owners and agree with them in a formal meeting that you are going to quote the company; these procedures are not clear, nobody has taken that procedure. It’s not SEC (Security and Exchange Commission) that wants to demutualise, it must originate from the owners.”

Anyanwu said that once the clarification was completed, the demutualisation was as good as done.

“As soon as they have done the clarification satisfactorily, nothing ought to stop the demutualisation for I don’t know any disadvantage associated with it and that is why I told you that nobody should be against it,” he said.

The SEC last week nominated council members assigned to look into the demutualisation process and appointed a new Chief Executive Officer, Mr. Oscar Onyema, to oversee the activities of the exchange.

Speaking on the gains of demutualisation, the Managing Partner, Suredge Investment Limited, Mr. Augustine Egberi, said that the process would enhance precision in the sector, adding that benefits from trading would be paid to investors in the exchange.

“One of the key advantages of demutualisation is transparency and of course the benefits will go the owners unlike before. By demutualising it, the benefits are passed to the owners.

“For instance, we, as stockbrokers, are owners of the exchange and that is why we are members of the stock exchange. When it is demutualised, we are supposed to receive dividends and any other person who buys shares of the stock exchange is to receive dividend. And because it is by law mandatory that when quoted on the stock exchange, the language we use is that you ‘dance naked’, meaning you have nothing to hide. So, whatever expenses and income you make will be published like audited accounts, and these are the major benefits of being demutualised.”

The Managing Director, Royal Securities Limited, Mr. Eze Ikechukwu, said, “The NSE is a company limited by guarantee; it is not like other limited liability companies. It is limited by guarantee and it is also a private sector initiative.

“When it becomes demutualised, it becomes quoted between the private and the public sectors. Even though it is being initiated by the private sector, it is going to become a Plc quoted on its own stock exchange, meaning that you can buy the shares just like you buy other shares.

Source : Punch