Convocation: Better and Dr. Wilson

Convocation 2012 Response Paper Quam Onigbanjo As students poured inside of the auditorium, and the Morgan State alumni and faculty made their entrance, the first convocation of the 2012 trail year began. The air was filled with peaceful music from the chorus, as hale as buzz of noise from the crowd. The aisles and staircases were packed with students trying to get seat near their friends. After most of the students were situated and the choir stopped singing, Dr. David Wilson began his canonic delivery. Dr.Wilson began with greeting the new and or returning students and faculty. Then, Wilson starts to get into the depth of his speech by talking round how Morgan can, and is expanding into a generally better place. Wilson speaks of the freshly built CBETS Building and about plans to build the Earl G. Graves business build. Wilson similarly talks about starting to improve the Jenkins building and softball fields. As Dr. Wilson spoke about the physical improvements that argon planned for the campus, an aura of fervidness came about the crowd.The part that seemed to excite the crowd the most was the announcement of the devastation of Montebello and the Soper library in order to take in a new building that would take over Montebellos duties. A general sense of pride filled the auditorium. The idea that Morgan was on its counsel to obtaining a better campus joyful everyone. As, a small HBCU in the middle of Baltimore city, Morgans campus does non correspond to that of UMD College Park, which many students at Morgan would prefer to go to.However, it is clear that as Morgan is expanding into an unconstipated more beautiful campus, students and staff will be more overconfident in their instruct and will be encouraged to represent Morgan with whatsoever pride. As, the president continued his speech, the auditorium remained quiet with all eyes focused on him. Dr. Wilson then started talking about respect and conduct. This topic was guareanteed to come up as Morgan has been in the news is the past weeks out-of-pocket to a shooter in the student center. Dr.Wilson made a general message that was meant for everyone when he says to respect yourself with the highest dignity and dont accept things that go against who you are, implying that you should have respect for yourself and one another in order to create a better environment for everyone. Due to the events in the past few weeks, Morgans note has been in the news for very bad reasons. These reasons were due to students at Morgan involved in murder and cannibalism, as well as stabbings and shootings.Although these events show a negative image to the outside world about Morgan State University, it is understood that Morgan is a school that is advancing and on its way to being a prestigious college. As a closing remark, Dr. Wilson valued his staff and students to know that everyone should conduct themselves in the highest manner. This is to ensure that unfortunate events such(pre nominal) as the ones that have occurred in the recent past do not occur again and that we as a university can restore our name contrary to what media portrays us.He closes his speech with encouraging his audience to find a secret respect for knowledge, learning, and education, as these should be the primary goals of any institution. After the choir sang the Alma Matter, a sense of inspiration seemed to have spread done the room as people were exiting the auditorium. The President has sent his message for the 2012 school year, which was to make Morgan a better place together.

Memory Project: Application to Learning & Study Habit Essay

depot is the capability to learn, retain, store and conceive knowledge from old experiences. Memories be accumulated from prior experiences and recollected, which can influence change of port or thought. This ability can assist with learning and adapting to new experiences. Memory is essential to our lives. Without a keeping board of the past we cannot operate in the range or think about the future. We would not be able to remember what we did yesterday, what we have done today or what we plan to do tomorrow. Without memory we could not learn anything.Short- termination memory is information a person is thinking of at that specific prison term, it is also known as functional memory (Morris & Maisto, 2014, pg.188-189). Short-term memory is the ability to remember and process information at the same time. Short-term memory acts as a chassis of scratch-pad for temporary reelect of the information which is being processed at any point in time, and has been referred to as t he brains Post-it note. When attempt to recall a telephone number or a excellent number of items needed at the grocery store, this information is held for fifteen to 25 seconds and is known as short-term memory (Morris & Maisto, 2014, pg. 194-195). The problem with short term memory is that only minimal amounts of information are remembered and for small periods of time.semipermanent memory is anything you remember that happened more than a few minutes ago. long-run memories can last for just a few days, or for umpteen years (Morris & Maisto, 2014, pg.191). long-term memories arent all of equal strength. Stronger memories enable you to recall an event, procedure, or fact on demand for example, that Paris is the capital of France. Weaker memories a good deal come to mind only through prompting or reminding. Long-term memory isnt static, either. You do not imprint a memory and leave it as if untouched. Instead, you often revise the memory over time perhaps by merging it with an other memory or incorporating what others set up you about the memory. As a result, your memories are not strictly constant, and are not always reliable.

Personal Protective Equipment (PPE) Proposal Essay

Hazards exist in every workplace in many several(predicate) forms sharp edges, falling objects, flying sparks, chemicals, noise and opposite potentially dangerous situations. The Occupational Safety and Health Administration (OSHA) requires that employers foster their employees from workplace hazards that can ca utilization injury. Controlling a hazard at its source is the best way to protect employees. Depending on the hazard or workplace conditions, OSHA recommends the use of engineering or work utilization suppresss to practice or eliminate hazards to the greatest extent possible.For example, building a hindrance between the hazard and the employees is an engineering control changing the way in which employees perform their work is a work practice control. When engineering, work practice and administrative controls are non feasible or do not fork up sufficient protection, employers must digest personal safety-related equipment (PPE) to their employees and image its u se. Personal protective equipment, commonly referred to as PPE, is equipment worn to minimize motion-picture show to a variant of hazards.Examples of PPE include such items as gloves, foot and spirit protection, protective hearing devices (earplugs, muffs) hard hats, respirators and full body suits. This maneuver allow for help both employers and employees do the following Understand the types of PPE. Know the basics of conducting a hazard assessment of the workplace. Select appropriate PPE for a variety of circumstances. Understand what kind of training is needed in the proper use and assistance of PPE. The information in this guide is oecumenical in genius and does not address all workplace hazards or PPE requirements.The information, methods and procedures in this guide are based on the OSHA requirements for PPE as set forth in the Code of Federal Regulations (CFR) at 29 CFR 1910. 132 (General requirements) 29 CFR 1910. 133 (Eye and acquaint protection) 29 CFR 1910. 135 (Head protection) 29 CFR 1910. 136 (Foot protection) 29 CFR 1910. 137 (Electrical protective equipment) 29 CFR 1910. 138 (Hand protection) and regulations that cover the building industry, at 29 CFR 1926. 95 (Criteria for personal protective equipment) 29 CFR 1926. 96 (Occupational foot protection) 29 CFR 1926. 100 (Head protection) 29 CFR 1926. 101(Hearing protection) and 29 CFR 1926. 102 (Eye and face protection) and for the maritime industry at 29 CFR 1915. 152 (General requirements) 29 CFR 1915. 153 (Eye and face protection) 29 CFR 1915. 155 (Head protection) 29 CFR 1915. 156 (Foot protection) and 29 CFR 1915. 157 (Hand and body protection). OSHA requires the use of personal protective equipment (PPE) to reduce employee exposure to hazards when engineering and administrative controls are not feasible or effective in reducing these exposures to acceptable levels. Employers are demand to determine if PPE should be used to protect their workers.If PPE is to be used, a PPE politi cal program should be implemented. This program should address the hazards present the selection, maintenance, and use of PPE the training of employees and observe of the program to ensure its ongoing intensity level. PPE is addressed in specific standards for the general industry, shipyard employment, marine terminals, and long shoring . The Requirement for PPE To ensure the greatest possible protection for employees in the workplace, the cooperative efforts of both employers and employees will help in establishing and maintaining a safe and healthful work environment.In general, employers are trustworthy for ? Performing a hazard assessment of the workplace to identify and control physical and health hazards. Identifying and providing appropriate PPE for employees. Training employees in the use and care of the PPE. Maintaining PPE, including replacing worn or damaged PPE. Periodically reviewing, updating and evaluating the effectiveness of the PPE program. In general, employees should Properly wear PPE, Attend training sessions on PPE, circumspection for, clean and maintain PPE, andInform a supervisor of the need to make or replace PPE. Specific requirements for PPE are presented in many different OSHA standards, published in 29 CFR. Some standards require that employers provide PPE at no cost to the employee while others simply state that the employer must provide PPE. Appendix A at page 40 lists those standards that require the employer to provide PPE and those that require the employer to provide PPE at no cost to the employee. United States discussion section of labor Secretary of Labor Thomas E. Perez

The Nature of Business

The Nature of line of descent IMAX This moving in report will analyse and explain certain satisfying beas in personal credit line environment in reference to the Sydney IMAX Theatre. We will face up at the business life cycle, the main elements of the businesss environment, the inbred and external influences on the business and the favorable responsibilities of the business. 1. Classify the business and tell its stage in the business life cycle, include a apprize history The Sydney IMAX Theatre is a large privately owned business.IMAX is a proprietary moderate business this means that IMAX has a separate sanctioned existence, distinct from its owners, managers and operators. It excessively has its own income tax liability, separate to your personal income tax. Effectively, a company has the powers of an individual and can Own and dispose of property and various assets Enter into contracts Sue and be sued The Sydney IMAX Theatre is currently in the maturity date stage of its product life cycle. As the business was offici anyy clear in 1996 it has well surpassed its Establishment and growth phase.The company is keeping its gross sales steady by taking advantage of its homogeneous product and the nonresilient demand for its product. IMAX is currently owned by Worlds Biggest Screens Pty Ltd. The history of Sydney IMAX Theatre all starts with the IMAX Corporation that was established in 1967. IMAX Corporation started out as the diligence attractor in the creation and production of high end rides, attractions and jut technology. The company then went on to be a world leader in the production and design of surround sound technology.The Sydney IMAX Theatre was open(a) in 1996 and was instantly booming with a very short makeup phase. IMAX very quickly became a tourist attraction and a mustiness see for all community living in the Sydney area. IMAX then adage a large chain of theatres open all over Australia in 4 years putting a great strain o n the company. As a result Cinema Plus Ltd was liquidated in 2000 because of cash in flow problems. This Liquidation precept all moving pictures except Sydney close and saw Worlds Biggest Screens Ltd devote all its time and energy on Sydneys IMAX theatre. 2. The Main Elements of the business environmentThe Sydney IMAX Theatre is located in on the waterfront in the heart of Sydneys Darling Harbor. This location has umteen benefits as it is an entertainment hotspot. The attractions include many restaurants, bars and cafes, the Sydney Aquarium, Sydney Wildlife World, The Australian study Maritime Museum, The Chinese Gardens of Friendship and The Powerhouse Museum. IMAX uses its unique location to its advantage by building special relationships with other businesses nearby whence providing pointless advertising and offering customers special deals that will provide extra sales.The IMAX provides its customers with the biggest cinema screen in the world. With this large screen come s a vast force of new possibilities that upgrades the picture quality and the viewers experience. This is the reason for the logo Movies show you, IMAX takes you there. The IMAX provides customers a wide variety of fills that are from many different genres. This wide variety increases the direct market therefore having a large and broader variety of people. The IMAX also includes a snack bar located in the facility that provides consumers with food and drink.This not only increases profit per person unless also attracts unintended customers. 3. Internal and external influences on the Sydney IMAX Theatre External influences Influences that a business cannot control Financial markets exchange rate changes daze profit income as film costs and royalties are based in US dollars Economic factors An scotch downturn can influence people to save and not spend. People cut costs on deprivation out therefore reducing the amount of people going to IMAX. An economic downturn also reduce s the amount of tourists in the theatre Technological advances in IMAX technology whitethorn produce whole new range of films that may or may not attract new audiences. Social changing patterns of leisure will impact greatly on attendance varies also with the time of year and cycles of school holidays. Geographic changes to theatre access, parking or public transport will impact on attendance Consumer flexibleness in scheduling allows the theatre to respond to changing consumer demand for films (reputation and word of mouth is very important is influencing the success of any new film)Internal Influences Influences that a business can control Technological expansion of e-commerce in marketing activities for example the online ticket purchase system has been extremely effective since its submission at the start of 2004. New Systems & procedures introduction EFTPOS and credit card payment has increased sales. New timetabling methods allow teaches to give their students more time i n the theatre. Financial New budgets will affect how a new film is marketed and how much advertisement it gets Product changes in programming and film option will influence attendance levels. The development of new products such as education talks will broaden the theatre market. The widening of the target market can potentially create new streams of people tour the theatre. Both the Internal and external influences on a business are very important in a businesss survival. The IMAX call for to focus on improving their internal weaknesses without forgetting to figure out a way to stabilise its strengths. Only then will the business succeed. 4.The estimable and Social Responsibilities of The Sydney IMAX Theatre The main purpose of business is to generate uttermost returns for its owners and shareholders. So therefore the business has the office of pursuing all activities that enhance profitability and increase the value of the business for the owners and shareholders. But a busi ness also has responsibilities to their consumers, topical anesthetic communities and society as a whole. It is not the right way just to operate within the letter of the law. Businesses should also try and divine service their local community and help its mployees lead better lives. IMAX has the social responsibility for all of its actions, their consequences and impacts on the community and the business itself. IMAX should examine every ratiocination they make not just based on profitability hardly on long term ethical business value and social responsibility. The Sydney IMAX Theatre has the responsibility of introducing policies in place that take allot of your employees and the local community, long term this will still enhance their business rat and over time lead to higher profitability.The IMAX shows its ethical responsibility by only partnering with businesss that are also ethically and socially responsible. As a business ethical and social responsibility is a great wa y to serve the community, advertise and plan ahead for the future. In recent studies it is shown that quite frankly ethical and social responsibility sells. inference In conclusion The Sydney IMAX Theatre is in its maturity phase of the business life cycle, it is a large privately owned proprietary limited business.Its vast array of films caters for a wide variety of target markets therefore increasing entries. The IMAX uses internal influences such as product and financial influences and is go about with external influences such as financial markets and economic factors. IMAX as a whole is slowly working towards gaining the publics respect by dint of ethical and social responsibilities which include pairing up with other ethically and socially responsible businesses, taking consequences for its actions and creating policies that specifically intend to take care of employees and the local community.

Margaret Atwood †Relationship between three of her poems Essay

Marg atomic number 18t Atwood is a Canadian poet, novelist, and critic, noned for her feminism and mythological themes. She was born in 1939 in Ottawa, rough the same snip World War 2 started. Her life was lived in a time of male dominance, which she did not resembling. She expressed her views of this by constitution, and her publications showed earthy of the feminine views that she believes in. According to a reviewer, Atwoods musical compositions atomic number 18 obtained from the traditional realist novel, where often the female protagonist is representative of an every cleaning woman character, and is victimized by g breaker and politics. In her stories Atwood combine fantasy and social realism, myth and caper and poetry, and also uses postmodernist whatchamacallums to unsettle the trustedties of traditional realism.The reason why she uses a lot of mythological themes is because her military chaplain was a forest etymologist. Many of the experiences that she had when she was a child, influenced her to write some the liaisons of nature. Her writings were praised by some, this canister be seen with all the awards and recognitions that she has received byout her long and productive life. Her most dandy award would be the Canadian Governor Generals select for poetry in 1966. Her work has been an inspiration to many and she pull up s incorporates be recognized for many years to come.The third meters that I am path out to discuss ar The Landlady, Rat Song and Song of the Worms. All triple of these verses use strong imagery to show Marg bet Atwoods view of the office that wowork force are treated. She uses several spectres in her poems, the tone that she generally uses for these three poems are frustration and anger. Another thing that she likes to use is a run on dah of poetry, which take ons for the readers emotions to carry on to the next line all the way to the end of the story.Almost all of her poems are free verse, I could no t find any rhythmic or rhyming devices used in any of them. She likes to use symbolisms to get her point out, and when she uses them they are direct. One thing that I find interesting in her writings is that she likes to use something like personification, but it is the opposite. She is giving people qualities of animals. Her writing mood is unique and interesting, and this look will be seen in the three poems.In the poem The Landlady, Atwood shows that wo workforce are stronger than men. In the beginning of the story, psyche is describing the landlady and we do notknow who this someone is, but I withdraw that this someone represents men. This person describes the landlady as searching and she is over. This symbolizes that women are getting stronger and will be controlling the men. The next subsection avows that the landlady controls the mans life. Everything belongs to the landlady and nothing to the man. The next section is where the man tries to work from the landlady, but she is always surrounding him. Even in the mans dreams the landlady will be there and there will be no way around it. The last section describes how the landlady is overpowering and will not let the man go through her. This poem is free verse, which promoter that there are no literary devices.The only style of writing that I can see in her poem is a fiber of run on poem, which allows the readers emotions and thoughts to carry through to the end of the story. The tone of the story is fear and entrapment by the male because of the womans power and authority over them. I recollect that this is a poem to the highest degree how strong the female can be over the men. The woman will be able to control the men, and men will be at the mercy of the women. This is a strong feminist view that Atwood supports and shows through her writing. This is a strong poem and was criticized by an American journalist for existence too one sided. I think that Atwood got her point through in this poe m.In the poem Rat Song, Atwood is onerous to show how the rat symbolizes the woman. In the first section, it says that when the man assays the voice of the rat singing, the man takes out his submarine sandwich and tries to kill the rat. This symbolizes the woman when she is trying to be heard, and the man is trying to keep out the woman up. The next stanza shows that when the man tries to trap the rat, the rat outsmarts it. This makes the man think that the rat is dangerous because it is very smart. That stanza symbolizes how women are smart and men should honor out for them. The following stanza negotiation about what the rat really indispensablenesss. It says in the poem, All I want is love, the rat does not want to remonstrate the man or live off of the man, all it wants is some love. This is vertical like women today, they do not want to annoy men, and all they want are love and respect. The reason why the rat lives off the man is not because it wants to, but because it is the only thing that it can do. Atwood is trying to say that women are weaker because men are suppressing the women.In the last section, there is a line that says, he is hiding /between your syllables. This line talks about how the rat can hear compassion, but it is trying not to be shown by the man. This is a really interesting poem that shows how Margaret Atwood feels about men. She uses many symbolisms to imply what the men are thinking about he women. His style of writing is basically free verse there is no perceptible beat or rhyming scheme. The only type of literary device that I can see is that she uses a style of run on poetry. This style can be seen throughout the entire poem to allow the readers emotions to carry all the way to the end of the story. The tone that she uses in the poem is anger. Atwood is mad about how women are treated by men. She finds that men know that women are smart and therefore are trying to suppress females.Her imagery is convincing and really ma kes us want to think about the truths in her writing. This poem was written in the early seventies, which is about the time when the feminists ideals were strongly implanted into the women of North America. This feminist view can be seen throughout the poem and what Atwood feels is expressed in the entire poem. Overall, this was a great poem with a message to the men on how they are treating the women.In the poem Song of the worms, Atwood tells us how women have been stepped on and taken advantage of. In the first section, it talks about how the worms have through with(p) their work and have been underground for so long. This section shows us that men have suppressed women for a long time. The women have done sufficient work for the men and it is time for a change. The second section talks about how all the women want is to be loved. This section is similar to a part in the first poem where it says that all women want is to be loved. The twist here is that they are rejected by th e boots of men. This symbolizes the men stepping on the women and treating them like dirt. The women have been stepped on long enough and they know what beingness stepped on is about.The next stanza says, Soon we will invade like weeds, everywhere but slowly. This is a very strong stanza that is trying to tell the men that soon the women will stand up for themselves and rebel. They will be stepped on no longer and have no fear of what men will try to do to them. The last stanza says that until the time comes, the worms will be in the dirt waiting for the right time to come out and attack. This poem is again free verse and uses a run on style of writing. Atwood makes the wormsymbolize the women who are hardworking and oppressed. She believes that one day, women will stand up up and say, Enough is enough, and rise up to rebel against the men.All three of these poems deal with feminism and show what Atwood thinks is going on and what will happen. The writing styles of these three po ems are similar. All of them use free verse and a run on poem style, which can be seen in more or less all of her work. This allows an easier way to get her point through. Her poems are strong and rabble-rousing showing what many people do not want to hear or accept. In the last two poems, they both use certain types of animals to symbolize the woman and how the men are treating them. They both say that men are stepping on women and that the women will one day rise and take down these men.Atwood uses animals because of the way that she was raised up, which was in a home with the father as an etymologist. Her fathers occupation made her enjoy the wilderness and nature, which has influenced her writing today. The first poem is similar to the other poems because it shows that the women have at last stood up for themselves and is now in control. Her feminist views are influenced by the time period that these poems were written in. During the late sixties and early seventies, there w as a strong feminist uprising making the women realize that they were like being treated like slaves.

Leadership Styles Case Study Essay

1. What eccentric of leadership is practiced at NCF, transactional or transformational? How do you know? The grammatical case of leadership that is practiced at NCF is transactional. Their values are honesty and honour of commitments and reciprocity. The managing director stresses to all the employees that dual relationships are a conflict of concern prohibited by the organization. Employees motivated by safety, security, and belonging and this is motivated by the leader rewarding the staff by having an employee lounge built so the employees dont have to eat off campus. Problem resoluteness is found in the leader, the director encourages staff to report any non- approved interaction between social workers and clients. This can be grounds for employee termination. statistical distribution of power Power-over the director uses rewards conceived and legitimate bases, by using the lounge as a power over reward. The influence is a unidirectional this memo is from director to emplo yees.2. What type of leadership is practiced at SSS, transactional or transformational? How do you know? The type of leadership that is practiced at SSS is transformational. The director uses power with rather than power over. He does not use rewards conceived or legitimate bases instead he uses expert, referent and inspirational bases. This is a 3-dimensional influence because the director simply asks his staff and employees for their participation and input in overcoming this obstacle. Their values are liberty, justice, equality, peace, and manitarianism because the director, staff, and employees have a goal in common, they are depending on each other, their prosperity will rise and filiation together, and they share the results of overcoming this obstacle together.3. Which style of leadership would you advocate for a human service organization? Explain your answer. The style of leadership I would recommend for human service organizations is transformational. This type of lead ership involves the organization as a whole. Everyone in the organization works together in order to master the common goals and all share the achievement. In my opinion it is best to take on the employees in running the organization. By doing this it will not only gear up them feel a part of the organization it will also annoy the hard work worth more to them. It makes the employees feel better close to the work place if they feel that their opinions count.

Financial Crisis: Beyond the 1929-2008 comparison Essay

There has been major stinting and monetary crisis that take aim afflicted the world providence since 1929. It all started with a great printing in 1929 that lasted for about 10 years and because m any(prenominal) of the otherwise major crisis fol subalterned it, the contiguous one cosmos the anoint crisis in 1973 then the Latin American debt crisis in 1980s, in 1990s the bring out of the japanese plus price bubble and then in 1997 the Asian monetary crisis and then in 2007 unify states subprime owe crisis leading to a Global financial Crisis (Wikipedia 1973 Oil Crisis, 2010).But there has been certain st appraisegy of the corporate welkin that distinguishes the crisis and its fix when ever so it took place, as during the clock of crisis the steps interpreted by the sight who are economically and financially linked either directly or indirectly departs very important due to the criticality of the situation and a particular step could make or break for the compa nies and economy as a whole.Getting over to the 1929 The Great depression that is considered to be a ravaging stock market crash in the history of United States of America that initially occurred because of the over-optimism of economists who believed that the stock prices are invulnerably high which they actually were in early on 1920s plainly soon those believes and certain predictions proved to be wrong when the stock market collapsed badly in October 1929 and remained broken-down for the nigh decade (Wikipedia Wall course Crash of 1929, 2010).People who borrowed money to pervert the number of stocks relying on to the predictions of the economists were help slight with the situation, some people sold in a loss rite away but some kept it with them in a desire to make them even but had to clutches for it for intimately of their life. The economy of U. S fell to its all time low in 1933 with industrial make out universe only 65% of the previous level. It non only affect ed U. S but all the countries ecumenical as with some examples organism Germany, Australia and Canada where the unemployment rates reached nearly 30% (Xinhua newsworthiness Agency, 2009).The depression that began in United States but quickly transformed into a worldwide slump because of the netherlying weaknesses and imbalances within the U. S economy that was previously vague by the Booming economy psychology and the blues of 1920s. The depression unvei conduct those weaknesses as it did the capabilities if the nations political and financial institutions to dispense with the massive downward economic cycle that was set in 1930.As it was a depression never sighted by the countries, government took a very little or no action in times of economic downturn and relied heavily on an automatic market forces (Demand and Supply) to finish the economic correction. But those forces were un successful in live onting the desired recuperation during the initial stages of the Great Depres sion and this badly hit discovery gradually inspired some of the fundamental changes in U.S economic construction and soon government came up with interfering in the form of taxations, creation relations, industrial ordinance, insurance, welfare services and certain spending from them confirmed economic st expertness in the industries with free Market economies. The second biggest recessional came in 1973, when Arab countries imposed embargo on the exports of oil and pet partingum in retaliation to the U. S decision to re-supply the Israeli military. As Arab countries announced during the Yom Kippur war, the countries that supported Israelis in the conflict.Hence, the long lasting capabilities of embargo related to massive oil prices, interrupt oil supply and recession and with persistent make up in the call for for crude oil and petroleum for the industries lead U. S and other European countries made it tough for the industrial sector there to grow and not only that Arab Oil suppliers got united with others to boost up the prices of Oil and crisis but exacerbated that limited the price of an old oil with that allowing newly extracted oil being sold at a higher price, resulting in a onanism of an old oil from the market, creating artificial shortage.As with this the 1973 oil inducted the worst ever economic crisis since World War II in key industrial states, resulting in a deadline of to a greater extent than 14 per cent industrial output in the U. S and more than 20 per cent in lacquer. As a striking fanfare was experienced during that period and this massive increase in prices were to be blamed for being suppressive of economic activity. The infected countries responded with a variety of new and probably taking a invariable initiative to contain further dependency. As the oil price astonied the economy by further leading to a stock market crash in 1973-1974.The strike followed several years of steep income declines after the recent failure of pu lling off the major westernern oil companies. The third real crisis situation occurred that was in 1980s that were the Latin American Debt crisis. It all started when the Latin American countries started borrowing huge sums of inter interior(a) exchange to develop the domestic industries during 1960s. The Latin American region that includes people intercommunicate Roman languages and specifically Spanish, Portuguese and French termed as Latin (Romance languages).The foreign debts for the Latin Americans exceeded USD 300 billion (Xinhua News Agency, 2009) in the early mid-eighties. In 1982 Mexico revealed it incapability of repaying the debts that triggered a world Shaking debt crisis. Mexicans requested a 90 day rollover of the payments of the principal in order to restructure the financial packages. unluckily that problem aroused all other Latin American countries and some other debtor countries in all parts of the world. The Mexican electrical shock was far reaching as it c reated an atmosphere that caused to issue dreadful forecasts by the people that were thankfully never realized.Most of the observers believe that the petrodollar recycling during seventies gave birth to this debt crisis. As during that period the oil prices grew dramatically. Commercial situates were as thoroughly eager of making profitable loans to the governments and state-owned entities in developing countries, using dollars that were flown from the heart Eastern countries and because of that the Latin America also got keen of borrowing the comparatively cheap money from the banks (Ruggiero, 1999).During the crisis, GDP per capita of Latin American countries dropped by 10 percent (Xinhua News Agency, 2009). The adjustable concern rates interest loans thresh about rocketed in the early 1980s when the United States attempted to minimize inflation by enforcing rigorous monetary policies where, at the same time, it also change magnitude its military spending. The administration of Reagan during that time in U. S did all this opus shortening their Income tax rates. The raw material prices fell drastically about the Globe, which resulted poor countries with lesser money even to re pay their debts.brazil nut and Mexico for example closely defaulted on their loans, and according to an transnational Law, there was no other option for these poor countries but to declare bankruptcy. Though commercial banks in that situation came to the rescue and prevented its defaults. Although many developing countries were left in huge debts and as a result they could no longer get loans. With no real way out, these nations control always relied heavily on the World Bank and/or International Monetary Fund (Ruggiero, 1999).The next real collapse of the Japanese Asset Price bubble was an economic bubble in Japan that took place from late 1980s to early 1990s when the Japanese real estate and stock prices experienced a ruinous crash in 1990 after years of Inflation. During t hat time Japan suffered inveterate deflation and economic recession due to its asset devaluation and in the kernel of 1990s the countrys economy entered into a phase where there was a Zero growth (Xinhua News Agency, 2009). Since late 1980s the Japans experience shows the emergence and bursting of the bubble that contend an important role in economic fluctuations throughout that period.The experience that was discovered to cast condition the indication of a close relations in both financial and macroeconomic instability to large fluctuations in assets prices and raising the question of what has to be an appropriate way of treating asset prices in macroeconomic polity making. It has to be noted that Japans experience is the enthusiasm of market participants and together with inconsistent be afterion of fundamentals that contributed to a large degree to maintaining temporarily high asset prices during that time.Such enthusiasm is often quoted Euphoria that is being excessively optimistic but un-getable expectations for the long term economic consummation being lasted for many years before dissipating. The escalated bullish expectations clearly observed in an increased comeliness yield during the period from the late 1980s to the early 1990s. As the growth rate of nominal GDP was computed from the equity yield spread in 1990 as high as 8 per cent with the standard assumption that was based on the discount factor.Although the go steady of low inflation at the time, it was unlikely that the potential growth rate of nominal GDP was close to 8 per cent. Hence that would be more natural to infer the high level of the yield spread in 1990 reflecting the intensification of optimistic expectations, which were not sustainable in the Long run (Shiratsuka, 2005). In the late 1990s that is in 1997 the Asian financial crisis emerged against the backdrop of U. S dollar appreciation where the exports of many Asian countries whose currencies were nailed down to the dol lar and became less competitive.In July, a widespread devaluation of Asian currencies followed Thailands decision to burn out their coin Baht, hence, marking the outbreak of the Asian financial crisis. Indonesia on the other hand with Thailand as well as South Korea was just about affected by the crisis. Indonesias GDP shrank with a massive 83. 4 per cent followed by Thailand and South Koreas 40. 4 per cent and 34. 2 per cent respectively the time of crisis (Xinhua News Agency, 2009). The scope and the severity of the collapse were so massive that the outside intervention became somewhat mandatory as considered by many as a new kind of colonialism requisite urgently.Since the countries that were sighting a huge downfall were not only the richest in their region but in the world since hundreds of billions of dollars were at stake and any response to the crisis had to be cooperative and international, in the desired case it was International Monetary Fund (IMF). They created rescu e packages i. e. the series of bailouts for the most affected economies enable those affected to nullify defaults that tied the packages to reforms that were intended to make the restored Asian currency with banking and financial systems.In some of the affected countries, restrictions on foreign self-will were greatly reduced and there were sufficient government controls set up to supervise all financial activities and ones they were to be independent and of private interest and the insolvent institutions had to be closed down in order to avoid insolvency affecting other institutions. The financial systems had to become more transparent to fork over the kind of reliable financial information used in the West to make sound financial decisions.Somehow the outline of IMF was opposed and came under great criticism because as countries fell into crisis, many local businesses and governments had taken out loans in terms of U. S dollars that made the currency often more expensive as compared to the local currencies which formed their income actually install unable to pay back to their recogniseors (Wikipedia 1997 Asian pecuniary Crisis, 2010). IN 2007 the U. S subprime mortgage crises lead to another monumental crisis situation that has hurt globally and has forced many businesses to shut down.The crisis broke out in the pass of 2007 in the U. S and its root being mortgages that were made to the borrowers with less ability to repay the loans. The largely invested in products related to subprime mortgages and the tightening of credits close to the world. It all started with the bankruptcy of one of the top banks in the world Lehman Brothers and Merrill kills buyouts in 2008 that caused a major slow down in the global economic growth with contraction in global swap and an astonishing rise in the level of unemployed workforce.Deep recession that emerged in Japan and some other countries that were on the verge of improving their economy somehow got dented w ith the current crisis (Xinhua News Agency, 2009). The crisis that is named the Great ceding back that resulted in the collapse of large financial institutions plus the bailouts of banks by national governments and penultimate downturns in stock markets around the world. The housing market in many countries also suffered, resulting in numerous dispossessions, foreclosures and prolonged vacancies as being considered the worst ever crisis situation since the Great depression in 1930s.It massively contributed to the failure of key businesses, declines in consumer wealth that is estimated to be in the trillions of U. S dollars with substantial financial commitments incurred by the governments, and a significant decline in the economic activities. The market based and regulatory responses have been implemented or are under consideration, while significant risks remain for the world economy over the periods from 2008. The collapse of in the housing bubble that peaked in U.S in 2006, aff ected the securities tied to real estate set to plumb thereafter, damaging financial institutions in all around the world. The bank insolvencies declined credit availability and damaged investors confidence and gradually had its impact on the stock markets, where securities suffered huge losses during late 2008. Critics argued though that credit rating agencies and investors were not successful in pricing the risks involved with mortgage related financial products, and that governments did not adjust their regulatory practices to address the twenty-first Century financial markets.Governments and central banks had responded with unprecedented fiscal stimulus, monetary policy expansion and institutional bailouts (Wikipedia Financial Crisis of 2007-2010, 2010). The Crisis throughout the Great depression in 1929 to the Great recession in 2008 are focused as have occurred due to different reasons but end of the day had the same impact and that was denting the global markets.But the stra tegies throughout the crisis had varied by the policy makers, sometimes it has been successful but sometimes as the recession that stands currently former to the year 2008 in still active and measures are being taken to overcome the problem. Many companies in among had come up with the strategy of mergers and acquisitions in order to save themselves from bankruptcy and over the years it has become successful for some but has also been unsuccessful.It is somehow noticed that the Mergers and Acquisitions have had the bitter part. The history clearly tells that mergers are not ALWAYS successful for the firms. It takes a great deal of experience and courage to settle with the other firm and handle matters on a larger scale but as it is said the risks are sooner or later stipendiary with dividends. The failures of Dunlop and Pirelli Merger that initiated in 1970, the British Europe conglomeration went sour as the Pirelli sank into the red.Difficulties in European tire operations in Fr ance, West Germany and Ireland as well as Britain were somehow balanced for some time by Profits from Africa, Asia, northwest America and Australia. The two companies merged because of an intense contest in the tire market and an increased demand for the Japan and North American tires made it challenging for the European markets to grow and the only solution was to increase the financial resources and gain recognition through it hence that resulted in a merger of these two firms.But the troubled economic trends of the 70s played a lead role in the failure of the alliance between Pirelli and Dunlop, progressively deteriorating the relationship between top management of the two groups and their coarse confidence and the deeper elements that led to the Union dissolution was an attempt to combine the groups characterized by significant differences in their models of Corporate Governance, as Pirelli was a family business, while Dunlop was a Public company.Pirelli, as well as many othe r Italian groups, was controlled by means of a pyramidal structure, cross-holdings of portion outs and agreement between shareholders, a keen balance which could be compromised by little changes in the share capital distribution or in its total amount. A delicate balance to preserve which Italian top management refused to implement deeper changes in the Union structure that, in the difficult 70s, might have led the group to achieve better performances.In this regard we can feel some similarities between the Union history and a subsequent unsuccessful international merger attempt the one between Fiat and crossroad in 1985. Notwithstanding the potential synergies of the joint-venture between the two automotive producers this project failed because the two head offices were incapable of achieving an agreement on the crucial issue of corporate control.The IMF and World Banks on the other hand have been actively participating but the crisis as the history shows, in most of the situa tions are so massive that their efforts are ruined as well. Bibliography Ruggiero, Gregory. (1999). Latin American Debt Crisis What Where Its Causes And Is It Over? on tap(predicate) http//www. angelfire. com/nj/GregoryRuggiero/latinamericancrisis. html. exit accessed 01 may 2010. Shiratsuka, Shigenori. (2005). The asset price bubble in Japan in the 1980s lessons for financial and macroeconomic stability.Available http//www. bis. org/publ/bppdf/bispap21e. pdf. Last accessed 01 May 2010. Wikipedia. (2010). Wall Street Crash of 1929. Available http//en. wikipedia. org/wiki/Wall_Street_Crash_of_1929. Last accessed 01 May 2010. Wikipedia. (2010). 1973 Oil Crisis. Available http//en. wikipedia. org/wiki/1973_oil_crisis. Last accessed 01 May 2010. Wikipedia. (2010). 1997 Asian Financial Crisis. Available http//en. wikipedia. org/wiki/1997_Asian_Financial_Crisis. Last accessed 01 May 2010. Wikipedia.(2010). Financial Crisis of 2007-2010. Available http//en. wikipedia. org/wiki/Financial _crisis_of_2007%E2%80%932010. Last accessed 01 May 2010. Wright, William M. (n. d. ). The Great Depression that Changed economical Theory. Available http//windowtowallstreet. com/1929marketcrash. aspx. Last accessed 01 May 2010. Xinhua News Agency. (2009). Backgrounder Major economic, financial crises since 1929. Available http//news. xinhuanet. com/english/2009-03/31/content_11107060. htm. Last accessed 01 May 2010.

Demutualization of Stock Exchanges

DEMUTUALIZATION OF STOCK EXCHANGES PROBLEMS, SOLUTIONS AND CASE STUDIES Edited by SHAMSHAD AKHTAR Director, disposal, pay and Trade Division, east and substitution Asia surgical incision, Asiatic Development Bank Asiatic Development Bank 2002 All beneficials reserved. The views expressed in this playscript atomic bout 18 those of the authors and do non necessarily reflect the views and policies of the Asian Development Bank, or its Board of Governors or the governments they represent. The Asian Development Bank does not promise the accuracy of the data include in this publication and accepts no responsibility for any(prenominal) consequences for their use.Use of the term country does not imply any discernment by the authors or the Asian Development Bank as to the legitimate or an different(a)(prenominal) status of any territorial entity. ISBN 971-561-475-2 frequentation line No. 100602 Published and printed by the Asian Development Bank P Box 789, 0980 manila, Philippines . O. CONTENTS Foreword Principal Authors Abbreviations xiii xv vingt-et-un give way I ISSUES INVOLVED IN STOCK EXCHANGE DEMUTUALIZATION 1 De commonization of Asian p arntage transpositions faultfinding Issues and Challenges by Shamshad Akhtar 1. 1 1. 2 1. 3 1. 4 1. 5 1. 6 1. 7 1. entrance De reciprocalization Its Definition, Size and signifi wadce motif and Driving Factors for Demutualization From Mutuality to Demutualization of bargain Benefits of Demutualization of substitutes regulative Oversight Challenges and Responses for Demutualized channel over monetary Vi king of Demutualized careen decisiveness 3 3 4 5 8 12 19 25 29 2 2. 1 2. 2 2. 3 2. 4 2. 5 2. 6 Background reading on Demutualization by Pamela S. Hughes Introduction What Demutualization Means The Reasons to Demutualize The Models An Update Since Demutualization destination 33 33 33 36 40 43 47Demutualization of acquit tacksProblems, Solutions and teddy Studies cecal appendage 1 The Mode ls 48 3 Motivations, Mechanics and Models for substitution Demutualizations in the United States by Roberta S. Karmel 3. 1 3. 2 3. 3 3. 4 Overview Reasons for Demutualization How Demutualization is complaisant Post-Demutualization Models 59 59 61 65 70 4 The anatomical social social structure of a Demutualized counter alter The particular Issues by David Holthouse 4. 1 4. 2 4. 3 4. 4 4. 5 4. 6 4. 7 Introduction monomania incarnate brass section Access Rights seek Management Financial Management Conclusion 73 73 73 77 80 81 82 83 Demutualization of rallys The Conflicts of invade (Hong Kong) by William Pearson 5. 1 5. 2 5. 3 5. 4 5. 5 5. 6 5. 7 social organization of supplants restrictive Role and Self- order macrocosm Policy Objectives of telephone line securities perseverance Regulation Why Should Demutualization Require a Reassessment of SRO endures? What Responses are Being Developed to Deal with These Problems? Conclusion Hong Kongs Frame plough itemisation o f HKEx and the Framework for traffic with Conflicts of amour 85 85 88 91 92 95 99 100 iv Contents APPENDIX Hong Kong telephone converts and Clearing extra Reinforcing Hong Kongs Position as a planetary Financial CentreA Policy theme 2 memoranda of Understanding for the list of HKEx on SEHK 3 percentage 13 of the Exchanges and Clearing halls ( optical fusion) Ordinance 4 Chapter 38 of the Rules Governing the Listing of Securities on the dribble Exchanges of Hong Kong express 5 Procedures to Deal with Conflicts of involvement cv 114 131 APPENDIX APPENDIX APPENDIX 133 138 APPENDIX 6 Demutualization of ExchangesThe Conflicts of Interest (An Australian Perspective) by David Holthouse 6. 6. 2 6. 3 6. 4 6. 5 6. 6 6. 7 6. 8 6. 9 Introduction Background to Conflicts An Exchanges Listing Regulation of Other Listings beamion of Intermediaries Profit Motive versus Supervisory Function globe Interest versus the Exchanges Commercial Interest novel duty Lines Conclusion 145 145 146 148 149 149 150 152 153 154 7 Demutualization of ExchangesThe Conflicts of Interest (The Australian Regulators Experience) by Claire G uprise 7. 1 7. 2 7. 3 Introduction Self-Listing Other Conflicts 157 157 157 160 vDemutualization of gillyflower ExchangesProblems, Solutions and effort Studies 8 8. 1 8. 2 8. 3 Regulation of a Demutualized Exchange (Canada) by Pamela S. Hughes Introduction Role of an Exchange Self-Regulation and Government Oversight SRO Conflicts of Interest Supervision of Listings Self-Listing Managing Conflicts of Interest Prudential Regulation Shareholders Directors and mightinessrs Memoranda of Understanding Conclusion 163 163 one hundred sixty-five 165 169 171 171 172 172 173 175 175 176 8. 4. 8. 5 8. 6 8. 7 8. 8 8. 9 8. 10 8. 11 8. 12 9 9. 1 9. 2 9. 3 9. 4Regulation of a Demutualized Exchange ( crownwork of capital of capital of capital of Singapore) by Lee Boon Ngiap Background restrictive Issues Arising from Demutualization The regulative Relati onship in the midst of the Monetary chest of drawers of Singapore and course Exchange of Singapore Conclusion 177 177 178 179 183 10 Regulation of a Demutualized Derivatives Exchange (United States) by Natalie A. commemorateman 185 185 186 190 192 195 Introduction A New Framework Exchange Oversight Regulatory Issues Raised by Demutualization Conclusion 10. 1 10. 2 10. 3 10. 4 10. 5 vi Contents APPENDIX APPENDIX APPENDIX Designated Contract food merchandise places for Regulated US Derivatives Exchanges 2 Registered Derivatives Transaction execution of instrument Facilities 3 The CFTC grocery store Surveillance Program 196 202 205 11 Regulation of Demutualized Exchanges (Australia) by Claire Grose 213 213 214 214 215 215 217 Legislative Framework Australian Securities and investment cash in hand delegacys (ASIC) Powers Supervision by foodstuff Operators Memoranda of Understanding (MOUs) qualifys Due to Demutualization New regulation 11. 1 11. 2 11. 3 11. 4 11. 5 11. 6 mapping II DEMUTUALIZATION CASE STUDIES 2 Australian rip ExchangeThe re vernalal to a Demutualized Exchange ASXs Experience by David Holthouse 12. 1 12. 2 12. 3 12. 4 12. 5 12. 6 12. 7 12. 8 12. 9 Introduction Background to Australian crinkle Exchanges Demutualization Obtaining division Approval Mechanism Used for Conversion Changes to the mints righteousness The Demutualization Process Memorandum of Understanding (MOU) with ASIC Demutualization and Listing Outcomes Subsequent Supervisory Development ASX Supervisory critique Pty confi aim 221 221 222 223 224 225 226 228 229 230 ii Demutualization of subscriber line ExchangesProblems, Solutions and drive Studies 12. 10 Changes in ASXs Focus and Activities 12. 11 Conclusion 231 233 13 Hong Kong Exchanges and Clearing Limited Demutualization, jointure and Listing The Hong Kong Exchanges Experience by ratifiedityrence Fok 235 235 236 238 239 242 246 Introduction Pre-Merger Period Two Exchanges and cardinal Clearing Ho uses Merger and Proposal Reasons For the Merger grocery store Reform Conclusion 13. 1 13. 2 13. 3 13. 4 13. 5 13. 6 14Hong Kong Securities and Futures steering The Conversion to a Demutualized Exchange The Hong Kong Regulators Experience by William Pearson 247 247 250 255 258 258 The Need for Reform The Reform Process Rationalized Market Regulation Implementing legislating Exchanges and Clearing Houses (Merger) Ordinance Key Issues Arising from Hong Kongs Experience with Demutualization 1 analysis of the Exchanges and Clearing Houses (Merger) Ordinance 14. 1 14. 2 14. 3 14. 4 14. 5 APPENDIX 261 15Singapore rakehell ExchangeDemutualization and Listing of the Singapore Exchange Limited by Alan Shaw 265 265 Introduction 15. 1 viii Contents 15. 2 15. 3 15. 4 15. 5 15. 6 15. 7 15. 8 15. 9 Drivers for Change The Rationale for Demutualization and Merger Impact of Demutualization The Merger Act The Process of Demutualization The Singapore Exchanges Initial Public Offer The body structu re of Singapore Exchange The Governance of Singapore Exchange Listing and Conflict of Interest 265 267 269 270 271 272 274 276 279 281 5. 10 Conclusion APPENDIX 1 Procedures to Deal with Conflicts of Interest 16 Toronto monetary fund ExchangeFrom Toronto tune Exchange to TSE Inc. Torontos Experience with Demutualization by Timothy Baikie 283 283 283 286 291 292 296 298 298 Introduction An Overview of the Toronto received Exchange (TSE) The Development of Mutual Exchanges Consolidation, globalisation and New Competition The Demutualization Decision Market Regulation by a Demutualized Exchange Next Steps Conclusion 16. 1 16. 2 16. 16. 4 16. 5 16. 6 16. 7 16. 8 17 Demutualization of the Philippine behave Exchange by Maria Larrie Alinsunurin 299 299 300 300 301 304 307 Introduction self-will Structure of the declivity Exchange Upon Demutualization merchandise Rights bodied Governance Business of the Exchange statutory Regulatory Role 17. 1 17. 2 17. 3 17. 4 17. 5 17. 6 ix Dem utualization of crinkle ExchangesProblems, Solutions and Case Studies PART III organize OF MUTUAL EXCHANGES 18 The capital of Sri Lanka germinate Exchange (Sri Lanka) y Rajeeva Bandaranaike 18. 1 18. 2 18. 3 18. 4 18. 5 18. 6 18. 7 18. 8 18. 9 Ownership Structure Listing info bodily Governance Business of the Exchange The Vision, Mission and Corporate dodge occupation Rights Regulatory Framework Self-Regulation Statutory Regulatory Role 313 313 314 314 315 316 317 317 317 319 320 321 321 18. 10 Investor security 18. 11 Funding of the Colombo Stock Exchange 18. 12 Stock Exchange Seeks to Demutualize 19 The Kuala Lumpur Stock Exchange (Malaysia) y Securities kick (Malaysia) 323 323 323 324 324 325 326 327 329 329 Introduction Ownership Structure of the KLSE Listing Data Corporate Governance Business of the Exchange barter Rights Risk Management and Supervisory Issues Statutory Regulatory Role Stock Exchange Seeking to Demutualize 19. 1 19. 2 19. 3 19. 4 19. 5 19. 6 19. 7 19. 8 19. 9 x Contents 20 The Shanghai and Shenzen Exchanges Business Operation, Governance Structure, and Regulatory Function ( volumes Republic of China) by Feng Wei 331 331 332 333 335 337 Overview Business Operation Governance Structure Regulatory Function Outlook on Demutualization 0. 1 20. 2 20. 3 20. 4 20. 5 21 The Taiwan Stock Exchange (Taipei,China) by Wanpo (Mina) Wang 341 341 342 342 343 344 344 347 347 Ownership Structure of Taiwan Stock Exchange Corporation Listing Data Corporate Governance Business of the Exchange Trading Rights Risk Management Statutory Regulatory Role Stock Exchange Seeking to Demutualize 21. 1 21. 2 21. 3 21. 4 21. 5 21. 6 21. 7 21. 8 22 Current Organizational and Regulatory Structure of The Stock Exchange (Thailand) by Klao Sanasen 349 349 352 Thai Capital Market Structure The Stock Exchange of Thailand 2. 1 22. 2 xi Contents prolusion Demutualization of a demarcation convince is entire process by which a non- pull ahead fellow outgrowth- possess mutual organization is trans make into a forprofit stockholder corporation. Exchanges much or less(prenominal) the introduction obtain been demutualizing because of international competition and technical challenges to traditional modes of employment securities. The change of a stock vary from a member- owned organization to a for-profit mete outholder corporation triggers a topic of questions ab turn out restrictive oversight.When a demutualized tack is listed on its own identity card, or so regulatory oversight necessitate to be transferred to a government regulator. In legion(predicate) countries, demutualization of the major national stock rallying has been go with by general securities regulatory reform. This book grew out of a conference on Demutualization of Stock Exchanges held in Manila on 13-14 shocking 2001 organized beneath the APEC Financial Regulators Training Initiative sponsored by the Asian Development Bank.The conference focussinged on create g reater understanding of demutualization by discussing the general problems it engenders and how these might be solved, developing third estate themes and lessons from case studies and also seeing how different countries take aim evolved different approaches to demutualization. This book is divided into three parts. Part I, consisting of Chapters 1-11, discuss various dimensions and issues involved in the process of stock exchange demutualization.Chapters 1-3 give a broad overview of the reasons for demutualization, the critical issues and challenges, the decision-making process relating to demutualization and the possible models stock exchanges may choose, including that of a privately owned for-profit corporation and that of a publicly held smart set listed on the exchanges own board. Chapter 4 sets forth the critical issues an exchange and its regulator mustiness confront in connection with the demutualization process from the vantage point of a particular jurisdictionAustra lia.Chapters 5-7 discuss the conflicts of absorb raised by an exchanges demutualization and thus Chapters 8-11 set forth how regulators in Canada, Singapore, the United States and Australia seek to deal with some of these conflicts by dint of regulation. Part II of this book is a series of case studies. Chapters 12-17 discuss the demutualization experience in Australia, Hong Kong, Singapore, xiii Demutualization of Stock ExchangesProblems, Solutions and Case Studies Toronto and the Philippines.Part III of this book provides information about jurisdictions that assume not demutualized their exchanges. Chapters 18-22 discuss the Colombo, Kuala Lumpur, Shanghai and Shenzen, Taiwan and Thailand exchanges. Chapters 1-16 were submitted as cover by professionals who presented paper at the conference. Chapters 17-22 were submitted by participants in the conference who were not presenters. This conference was organize by the finance and Industry Division (East) of ADB under the overa ll way and supervision of Ms.Shamshad Akhtar, Director, Governance, finance and Trade, East and Central Asia Department. Special thanks are due to the various contri exclusivelyors as well as the organizers. The book has been edited by Ms. Akhtar. Ms. Roberta Karmel, Professor of Law at Brooklyn Law School, was engaged to mix the conference materials and provide editorial advice. R. Jane Lee, a student at Brooklyn Law School curbed the compilation of this book. Mr. Lyle Raquipiso coordinated the publication of this book and Ms. Nancy Bustamante provided administrative support. Geert H.P van der Linden . B. Director General East and Central Asia Department Asian Development Bank xiv Contents PRINCIPAL AUTHORS SHAMSHAD AKHTAR is Director, Governance, Finance and Trade Division of the Asian Development Banks (ADBs) East and Central Asia Department. She oversees ADBs fiscal switch operations in the Peoples Republic of China, Mongolia and the Central Asian Republics, including SME, microfinance and other rural market financial intermediation arrangement and private sector assessment work and trade liberalization and facilitation.Concurrent to holding other portfolio from 1998-2001, she was head of ADB Secretariat for Asia pacific Economic Cooperation, leading the insurance dialogue and preparation of all document/ documents for this forum, involving interactions with Finance Ministers and Central Bank Governors and their Deputies. Before connexion ADB in 1990, she worked as Economist in the World Bank in the 1980s, and prior to that, in Pakistans Planning Agency. She obtained a B. A. in frugals and M. Sc. in Economics from Islamabad, an M. A. n Development Economics from University of Sussex in the United Kingdom (UK), and a Ph. D. in Economics also from UK. She had her post-doctoral fellowship as a Fulbright pupil and was visiting fellow at the Department of Economics, Harvard University in 1987. Ms. Akhtar has presented numerous papers on economics an d finance in international conferences. TIMOTHY BAIKIE is Director, Global Market Initiatives at the Toronto Stock Exchange and is postingable for analyzing market structure issues from a broad, strategicalalal standpoint, including the market model for the Global Equity Market (GEM).Previously, he was Special Counsel, Market Regulation and Director of the Regulatory and Market Policy Division of the Exchange, which is responsible for policy and rule development for the equities and derivatives market. He has spoken at numerous conferences on market regulation, market structure and merged governance issues and was a member of the Advisory Board for the 1999 Canadian Corporate/Securities Law Moot Court Competition. He received a B. A. from York University (Glendon College), an LL. B. and a B. C. L. from McGill University and an LL. M. rom the University of Illinois at Urbana-Champaign. He was called to the Ontario Bar in 1987. LAWRENCE FOK is the substitute Chief Operating Off icer of Hong Kong Exchanges and Clearing Limited and the Chief decision maker of the Stock Exchange. Mr. Fok conjugated the Stock Exchange in February 1992 and was xv Demutualization of Stock ExchangesProblems, Solutions and Case Studies appointed Executive Director of the Listing Division in February 1997 and old Executive Director of its Regulatory Af comme il fauts Group in November 1998. Mr. Fok has over 19 long sequence of experience in financial run and securities regulatory work.Before joining the Stock Exchange he worked for the Securities and Futures direction, the Office of the relegatinger for Securities and Commodities Trading of the Hong Kong Government and other private organisations in areas of corporate finance consultatory work, securities dealing, venture capital investment, mainland China trade and investment focussing. CLAIRE GROSE is Special Counsel, Regulatory Policy Branch at the Australian Securities and Investments Commission (ASIC). For both years prior to July 2001, she held the position of ASICs Director, matter Markets Unit.Before joining ASIC in January 1999, Ms. Grose was a senior partner in the national Australian law theatre Freehill Hillingdale & Page, specialising in corporations and securities law. She has more than 20 years experience as a corporate lawyer and played a major part in developing changes to the Corporations Law in Australia in her role as a member of the Corporations Law Simplification Task Force from October 1993 to March 1997. DAVID HOLTHOUSE is National Manager, multinational Affairs, at the Australian Stock Exchange (ASX), which he fall in in February 1996.His responsibilities include fostering links with governments, condescensiones and market participants to pick up that ASX has a role in shaping the regional capital market environment, arrange ASXs international activities to ensure strategic fit, identifying cross-border listing opportunities where ASX can minimal brain dysfunction val ue, and providing an outcomeive protocol service on behalf of the Exchange. He has been a member of the Working mission of the East Asian and Oceanian Stock Exchanges fusion (EAOSEF) since 1997 and is soon the Federations Working Committee Chairman.A key activity of the Committee during this time has been the facilitation of cross-border profession. He was formerly a career naval officer, untalkative as a Rear Admiral in 1993. He is a member of the governing bodies of a number of professional and charitable organisations, and a Graduate of the Australian appoint of confederation Directors. He is a charter Professional Engineer, and a Fellow of both the Institute of Engineers Australia and the Institute of leatherneck Engineers (UK). He was appointed as an Officer in the Order of Australia in 1991. xviPrincipal Authors PAMELA S. HUGHES is a securities law partner at Blake, Cassels & Graydon LLP in Toronto. Her practice focuses on international corporate finance and mergers and learnednesss works and advice regarding capital market regulatory reform. Ms. Hughes is a member of the team of lawyers from Blake, Cassels & Graydon involved in the ongoing Ontario Securities Commission (OSC) Policy Reformulation Project which commenced in 1995. precedent to February 1, 1995, Ms. Hughes was Director of the Capital Markets/ worldwide Markets Branch of the OSC.Ms. Hughes has also taught international securities regulation in the LL. M. programme at Osgoode Hall and the LL. B. programme at the University of Toronto, and was a contributing editor to northwesterly the Statesn Corporate Lawyer. Ms. Hughes updated the chapter on Philippines securities law in external Securities Regulation Pacific Rim, Volumes I and II (New York Oceana) released in 2000. In 2000, Ms. Hughes was nominated by the federal Department of Finance to the financial services roster for deviation resolution under the North American Free Trade Agreement.ROBERTA S. KARMEL is a Professor of La w and Co-Director of the Center for the Study of International Business Law at Brooklyn Law School and Of Counsel to the law firm of Kelley Drye & warren LLP In addition, she is a . director of the Kemper Insurance Companies. She was a Commissioner of the Securities and Exchange Commission from 1977-80, and a public director of the New York Stock Exchange, Inc. from 1983-89. She received a B. A. cum laude from Radcliffe College in 1959 and an LL. B. cum laude from New York University School of Law in 1962.Professor Karmel is the author of over 30 articles in legal journals, and writes a stock column on securities regulation for the New York Law Journal. Her book authorise Regulation by Prosecution The Securities and Exchange Commission vs. Corporate America was published by Simon and Schuster in 1982. LEE BOON NGIAP heads the securities regulatory policy function in Monetary Authority of Singapore (MAS). His division is responsible for regulatory framework development, policy coo rdination and market analysis of the securities, futures and asset management industries in Singapore. preliminary to taking up his responsibility in the Securities and Futures Department, Mr. Lee was the good example in the MAS office in London, responsible for spearheading the promotion of Singapore as an attractive place for UK and European financial institutions to invest and set up operations. Mr. Lee joined MAS in 1986 and worked in some(prenominal)(prenominal) departments before joining the Markets and Investment Department, where he rose to become a Senior subordinate Director in the Monetary Management Division. xvii Demutualization of Stock ExchangesProblems, Solutions and Case Studies in that location his responsibilities included the conduct of Singapores exchange rate and monetary policies, and management and evaluation of the foreign exchange exposures of public sector entities. He holds an honours degree in Civil Engineering from the National University of Singapo re and is a Chartered Financial Analyst. NATALIE A. MARKMAN is Counsel to Commissioner Thomas J. Erickson of the US trade good Futures Trading Commission. She provides legal counsel and analyzes such(prenominal) policy issues as those created by derivatives market deregulation, electronic trading, and exchange demutualization.Ms. Markman reviews and evaluates all documents submitted by staff for Commission approval, including exchange designations, contract and rule approvals, rulemakings, opinions, and enforcement actions. Previously, she served as Special Counsel in the Commissions Office of International Affairs, as an Attorney-Advisor in the Office of the Chief Counsel of the Commissions Division of Trading and Markets, and as an Attorney-Advisor to Commission Administrative Law Judge George H. Painter. Ms.Markman also was a program line Fellow for the Foundations of American Law and hard-hitting Education program at the Georgetown University Law Center, where she received h er J. D. degree in 1993. WILLIAM PEARSON is Director in the Corporate Finance Division of the Securities and Futures Commission (SFC) in Hong Kong. He is responsible for assisting in formulating policies for the effective regulation of listed companies and the securities markets. Daily work involves observe and regulating corporate activities of publicly listed companies, overseeing the Stock Exchange in its listing related functions, nd approving cracks of takes and debentures to the public by non-listed companies. Mr. Pearson joined the SFC as a Senior Manager in the Corporate Finance Division in 1998. Prior to that he spent nine years as a lawyer with Norton Rose, a London law firm, practicing in the areas of corporate finance and M&A. He graduated as a lawyer from Kings College, London in 1987. ALAN JOSEPH SHAW is Executive Vice-President of the Singapore Exchange Limited, Head of Risk Management and Regulation.Previously, from 1991-2000, he was National Manager, Supervision of the Australian Stock Exchange Limited, Melbourne. He was educated at the University of Melbourne, from which he received a bachelor of Laws in 1979, a Graduate Diploma of Public Policy in 1988, and a Master of Arts in Public Policy in 1994. From 1980-91, he served as a Principal xviii Principal Authors Legal Officer for the National Companies and Securities Commission, as a Judges Associate, and as a Barrister. He has authored a number of articles on fellowship law. xix Abbreviations ABBREVIATIONSAmex APEC Archipelago Archipelago Exchange ASIC ASTC ASX ATS BOT CATS CBA CBI CBOT CCASS CDNX CDS CFE CFTC CGE CME CMP CNS CSE CSRC DTF EBOT ECM ECN Australian Securities and Investments Commission Australian gag rule and Transfer Corporation Pty Ltd Australian Stock Exchange alternative trading system Bank of Thailand computer assisted trading system Colombo Brokers Association Canadian-establish interlisted issuer clams Board of Trade Central Clearing and closedown arrangement C anadian Venture Exchange Central Depository organization communication front-end system Commodity Futures Trading Commission Committee on the Governance of the Exchanges Chicago Mercantile Exchange Capital Market Masterplan unvarying Net Settlement Colombo Stock Exchange China Securities Regulatory Commission derivatives transaction execution facility exempt board of trade exempt commercializedised market electronic communications ne iirk American Stock Exchange Asia Pacific Economic Cooperation Archipelago Holdings, LLC Archipelago Exchange, LLC xxi Demutualization of Stock ExchangesProblems, Solutions and Case Studies ETF ETP FCM FIBV GEM HIBOR HKCC HKEC HKEx HKFE HKFECC HKSCC IDA IISL IMM IOM IOSCO IPO KLSE KULBER LFX LSE MAS MCD MDEX ME MESDAQ MkSE MMCD MOF MOU MSE xchange traded fund integrity trading permit futures instruction merchant International Federation of Stock Exchanges Growth and E meeting Market Hong Kong Interbank Offered Rate HKFE Clearing Company Hong Kong E xchanges and Clearing Hong Kong Exchanges and Clearing Limited Hong Kong Futures Exchange Limited HKFE Clearing Corporation Limited Hong Kong Securities Clearing Company Investment Dealers Association India Index Services & Products Limited International Monetary Market Index and Option Market International Organization of Securities Commissions Initial Public Offer Kuala Lumpur Stock Exchange KLSE-Bernama Real-Time Information Services Labuan International Financial Exchange London Stock Exchange Plc Monetary Authority of Singapore Malayan Central Depository Malaysia Derivatives Exchange Montreal Exchange Malaysian Exchange of Securities Dealing and Automated Quotation Bhd Makati Stock Exchange Mark to Market Collateral Deposit Ministry of Finance memorandum of understanding Manila Stock Exchange xxii Abbreviations MSRS NASD NASDAQ NASDR NSE NYSE OECD OM OSC OTC PCX PCX PCX Holdings PCXE PSE REC RIIAM SAFE SC SCA SCANS SCCP SCORE SCH SEA SEC SEHK SEL SEOCH SES SET Malaysian Share readjustment Services National Association of Securities Dealers, Inc. NASDAQ Stock Market, Inc. NASD Regulation, Inc. National Stock Exchange of India New York Stock Exchange Organisation for Economic Co-operation and Development OM Gruppen AB Ontario Securities Commission over-the-counter Pacific Exchange PCX Equities, Inc. PCX Holdings, Inc.PCX Equities, Inc. Philippine Stock Exchange, Inc. recognized exchange controller Research Institute of Investment Analysts Malaysia South Asian Federation of Exchanges Securities Commission Securities Commission Act 1993 Securities Clearing Automated net Services Sdn Bhd Securities Clearing Corporation of the Philippines System on Computerised Order Routing and execution of instrument Securities Clearing House Securities and Exchange Act of 1992 Securities and Exchange Commission The Stock Exchange of Hong Kong Limited Taiwanese Securities and Exchange Law SEHK Options Clearing House Limited Stock Exchange of Singapore Stock Exchange of Th ailand xxiiiDemutualization of Stock ExchangesProblems, Solutions and Case Studies SFA SFC SFE SGX SGX-ST SIA SIIS SIMEX SIPF SME SRC SRO STAMP TBDC TSD TSE TSE RS TSE TSEC TSI Securities and Futures Act Securities and Future Commission SFE Corporation Limited (formally k like a shotn as Sydney Futures Exchange Limited) Singapore Exchange Limited Singapore Exchange Securities Trading Ltd Securities Industry Act 1983 Special Isolated fast Settlement Singapore International Monetary Exchange Limited Securities Investors Protection Fund Small Medium Enterprise Board Securities Regulation calculate Self-regulatory organization standard message protocol Thai Bond Dealing Center Thailand Securities Depository Co. , Ltd.The Toronto Stock Exchange TSE regulatory services capital of Japan Stock Exchange Taiwan Stock Exchange Corporation Thailand Securities Institute xxiv PART I Issues Involved in Stock Exchange Demutualization Demutualization of Asian Stock ExchangesCritical Issues and Cha llenges 1 Demutualization of Asian Stock Exchanges Critical Issues and Challenges Shamshad Akhtar 1 1. 1 Introduction Stock exchanges purpose a entertain of services to listing companies. These include (i) liquidity, (ii) execution of services, (iii) signaling function for listed companies, (iv) monitoring of trading to prevent manipulation and insider trading, (v) standard rules to reduce transaction costs, and (vi) clarification of buy and order transactions.Traditionally, stock exchanges operating as a unite of genes offered these services as monopoly operators serving coarsely under a mutual governance structure. The members of the club enjoyed rights of self-command, decision-making (one member, one right to vote), and trading. Value enhancement of the exchange was achieved by restricting approach path. Stock exchanges are now increasingly changing their business model and restructuring themselves across the world due to the simultaneous convergence of a number of powe rful developments. The nigh notable of these has been the (i) rapid advancement and mental home 1 Director, Governance, Finance and Trade, East and Central Asia Department, Asian Development Bank. 3 Part I Issues Involved in Stock Exchange Demutualization n technology that has facilitated alternative trading systems (ATS) including electronic communication networks (ECNs) and (ii) maturement market competition and integration as well as globalization bring forth partly by cross-border listing and portfolio flows, etc. Together these developments have eroded the significance of physical national stock exchanges and their trading floors. Consequently, across the musket ball stock exchanges are now rethinking their business strategy and model in order to find ways of how take up to survive. In the process, exchanges have evolved towards bare-ass corporate, legal and business models to strengthen governance and face the competition.This process of novelty from members associatio ns into for-profit corporations is referred to as demutualization. There is a great need to distill lessons from the apace evolving experience with demutualization and synthesize both the normative and positive aspects of this exciting and relatively sore structure so that developing countries can take prefer of it. This paper, in that respectfore, aims to provide basic perspectives and dimensions of demutualization based on a review of literature and experience. In the process it explains (i) What is demutualization and how significant has it been? (ii) What factors have been driving the demutualization of exchanges? iii) What self-command, legal and strategic approaches are being adopted in the process of demutualization? (iv) What are the headway benefits of demutualization? (v) What regulatory challenges and responses does a demutualized exchange face? (vi) Have the demutualized exchanges been financially executable? 1. 2 Demutualization Its Definition, Size and Signifi cance Demutualization, in the strictest sense, refers to the change in legal status of the exchange from a mutual association with one vote per member (and possibly consensus-based decision making), into a company special(a) by shares, with one vote per share (with majority-based decision making).Demutualization makes sense if it induces a change in the exchanges objective from managing the interests of a closed 4 Demutualization of Asian Stock ExchangesCritical Issues and Challenges member-based organization with a central focus on providing services for the benefit primarily of the members/brokers and keeping costs and investments limited to financing agreed by members, into a company set up with the objective of maximizing the value of the faithfulness shares by focusing on generating lettuce from servicing the demands of their customers (brokers and investors) in a matched manner. The number of exchanges that have privatized or listed has been increasing since the Stockholm Stock Exchange demutualized in 1993.In 1999, 11 stock exchanges had been privatized or listed and this number rose to 21 by advance(prenominal) 2002, with several other exchanges either considering demutualization or already having stated their confined to do so. Of the World Federation of Stock Exchanges-formerly the International Federation of Stock Exchanges (FIBV)-member exchanges, around 52% of stock market capitalization is accounted for by demutualized exchanges. In Asia, demutualized stock exchanges including the Tokyo Stock Exchange now account for 76 % of the regions market capitalization (Figures 1. 1 and 1. 2). Figure 1. 1. Market Capitalization FIBV Stock Exchanges (2001) Figure 1. 2. Market Capitalization Stock Exchanges in Asia (2001) Demutualized 52% non demutualized 48% Demutualized 76% Not demutualized 24% Source International Federation of Stock Exchanges (FIBV) Source International Federation of Stock Exchanges (FIBV) 1. 3 Motivation and Driving Factors for Dem utualization Today, exchanges are no longer the sole primary and inessential market makers or the sole service providers of trade execution, signaling or other activities. This is largely because of the widespread proliferation of ATS and ECNs that have been supported by technological revolution and introduction of high capacity hardware, software packages and Internet facilities. ATS/ECNs have allowed efficient and effective pertaining 5Part I Issues Involved in Stock Exchange Demutualization of the buy and interchange orders of customers at lower transaction costs, speckle offering price transparency, trader anonymity and extended trading hours. macro global brokers are able to price-match within their own order-stock and totally state the net position as a trade to the exchange (thus avoiding transaction costs). Given the competitive edge, the market share of the ECNs has grown. In 2002, ECNs have accounted for 45% of NASDAQ shares traded (compared to 25. 5% in 1999) alth ough they only accounted for about 5% of the listed shares traded. Of the several ECNs, Island ECN exclusively accounted for 32% of the ECNs market share.Instinet makes up another 29%, ArcaEx 27. 2% (formed done with(predicate) the merger of Archipelago and REDIBook), Bloomberg Tradebook 6. 3% and Brut ECN 5. 3%. The rest is accounted by other networks. 2 Having attracted substantial trading, ECNs are also entering into strategic alliances or tie ups with other exchanges or are offering services such as quotes and listing shares to further raise revenues. The growing competitive force has also triggered a wave of restructuring and mergers and alliances among securities markets to maximize economies of scale, accessibility and market reach, piece of music providing global trade facilities by means of around the clock trading.For instance (i) Euronext was naturalised by the merger of former national exchanges in France, the Netherlands, Belgium and Portugal and the integrated e quity trading markets of the northern-European countries of Sweden, Finland, Denmark and Norway (ii) in the derivatives markets, a/c/e, the trading platform of Eurex and Chicago Board of Trade (CBOT), and Globex (Chicago Mercantile Exchange, Liffe, Singapore and others), have already formed global alliances with participants from all time zones, thus creating 24 hour trading markets and (iii) NASDAQ has developed global alliances/interconnections to attract more liquidity for the United States and regional securities markets. NASDAQ has structured agreements with Europe, Japan, Hong Kong and Canada and is positioned for similar arrangements with China, Latin America and Middle East. In Asia, several exchanges have trading links and dual-listing agreements with the United States-based NASDAQ. 2 Global Finance Staff Research. 2002. National Association of Securities Dealers (NASD). JP Morgan, H. 6 Demutualization of Asian Stock ExchangesCritical Issues and Challenges The market integr ation has encouraged a process of disintermediation.With the emergence of mod-fangled structures, there is no need for formal floors of stock exchanges or financial market intermediaries and participants, as they do not add value (to match the cost) to trading of securities. Exchanges with low market capitalization and weak trading volumes have had to particularly re-examine their operations and organizations with the view to increasing their competitive offering and price mix to minimize further diversion of trading volumes. Summarizing the emerge issues, a recent World Bank study3 concluded that Powerful trends of internationalization and migration of order flow are putting pressures on stock exchanges around the world. For some exchanges, already more than half of trading and listing has migrated inshore Migration makes it ambitious for countries to sustain a full-fledged local stock exchange.As trading volumes further decrease, financing the fixed viewgraph of maintaining market oversight, clearing and village systems, and generating enough business for local investment banks, accounting firms, and other support services will become even harder, especially for smaller rising markets. The trend towards increased migration will thus make it more difficult for small exchanges to survive. page 18 In order to survive in this environment, exchanges need to transform and move towards commercially oriented business practices with greater focus on improving cogency, accessibility and ease of use of their systems. Since exchanges have higher overhead costs (as compared toECNs) due to (among other things) cost of building and facilities, they need to get to harder to achieve profitability and economies of scale, fleck offering competitive services and fees congenial to those being provided by the ECNs. These considerations have driven exchanges to consider alliances and consolidation. By merging two exchanges, the exchange can multiply the volume at the comparable overhead cost (provided cost cutting synergies are richly explored). It can thus offer to the investors and brokers more listed securities for trading on the same platform. There are forecasts available that indicate that by 2010, there will be fewer than five major stock exchanges and, perhaps two or three of these will be entirely electronic marketswhich have not yet been established. 4 3 4 Claessens, Stijn, et. l. 2002. Explaining the Migration of Stocks from Exchanges in Emerging Economies to International Centers. World Bank Working Paper No. 2816. Young, Patrick. 1999. Capital Market Revolution The Future of Markets in an Online World. Harlow Financial Times. 7 Part I Issues Involved in Stock Exchange Demutualization 1. 4 From Mutuality to Demutualization of Exchange The transformation of exchanges from mutual to demutualized structure involves two key features (i) a change in the ownership structure, and (ii) a change in legal as well as organizational form. Bot h need to be accompanied by adequate safeguards to ensure appropriate governance.Depending on the nature of ownership and legal forms adopted, the demutualized exchangegiven their corporate model and facing growing competitive pressureslends itself to focusing on evolving strategic positioning which, depending on a number of conditions, could involve greater market consolidation, vertical integration and intersection point diversification. 1. 4. 1 Ownership Structure The transformation from the mutual member-based to demutualized exchange involves issues of transferability of ownership from members to nonmembers. There are various ways that dilution of social status can be achieved. Sequentially, it involves conversion of breathing member seats by monetizing these and assigning a certain value per seat.Once the valuation is done, the members can opt to convert their rank to share ownership or to sell off their interest to nonmembers. In most cases of demutualization of exchange, members have opted to retain their share ownership. A listing of equity shares in the exchange facilitates the unlocking of the members equity and buy out of the interest of the traders, while leading to the monetization of the value of the members seats. An entity with freely transferable shares, rather than social station rights, can form equity-swap-based strategic alliances or mergers with other exchanges, domestically or in other countries or time zones. Such alliances are stronger and offer greater credibility than pure cooperation agreements.To avoid stock exchanges operating in special or limited interests, securities regulators often place restriction on ownership by one holder or a free radical of holders to non-controlling put on the lines of 5-10%. Limits on ownership stakes could affect potential take-over by other exchanges. Such take-overs could have merit in terms of efficiency and economies of scale of the market especially where more efficient participants begi n unable ones. Recognizing the synergies of take-overs, most demutualized exchanges have provisions in place to allow other 8 Demutualization of Asian Stock ExchangesCritical Issues and Challenges exchanges, or technology partners, the disaster of acquiring or swapping strategic stakes.The reluctance to relinquish control to strategic partners or owners sticks however one reason why non-equity, swapbased conjunct alliances have been more prolific in the exchange industry. 5 Indeed, several hostile take-over attempts (including OM Gruppens moves to acquire the London Stock Exchange in 2000, and the command war for Sydney Futures Exchange by Australian Stock Exchange and Computershare in 1999) have failed due to the take strength still exerted by the brokers ( skirt 1. 1). 1. 4. 2 Legal and Company Structure Most stock exchanges are registered as private limited companies with a paid-up capital base, while others break down as member associations or cooperative arrangements.At the end of 2000, FIBV statistics indicates that 90% of its member exchanges, accounting for 60% of market capitalization, were private limited companies. Almost 46% of these were legal company exchanges with inside ownership. Around 25% (accounting for 21% of market capitalization) of the exchanges had been privatized, 13% (accounting for 8% of market capitalization) were registered as listed companies6 and the remaining 17% had other types of statuswith some being state-owned or semi-public entities (such as the Shenzhen and Shanghai Stock Exchanges (SZSE and SHSE). As evident in Table 1. 2, in Asia, with the exception of SZSE and SHSE, most of the exchanges are legal entities registered as private limited companies.So far, five exchanges in Asia have been fully demutualized, with three of these listed on their own exchange, and another two have announced plans to demutualize in 2003. The legal structure for the demutualized exchange is based on considerations similar to that for any profit-making company including decisions on number of shareholders (partnership vs. corporation), voting procedures, limitation of indebtedness (liability limited to equity invested vs. joint and several liability for all debts), accounting and reporting exigencys (based on taxation laws and on partners/shareholders access to information of the company) and distribution of dividends (re-investment 5 6Interestingly, this is similar to another rapidly globalizing industry with national quasimonopolistic companiesthe airline industryin which global cooperation alliances have prove very important for customer retention. Notably half (of six) of the exchanges that have listed themselves are in Asia. 9 Part I Issues Involved in Stock Exchange Demutualization Table 1. 1. Asian Stock Exchanges Shareholding Structure SHAREHOLDING LIMIT Australian Stock Exchange (ASX) Initially maximum shareholding limit was 5%, but the Financial Services Reform Act raised this to 15% in March 2002. Hi gher shareholding can be allowed if it is in national interest subject to approval of the Minister for Financial Services and Regulation.Singapore Exchange Limited (SGX) Maximum shareholding limit is 5% and can be higher if okay by the Monetary Authority of Singapore (MAS). In 2001, MAS announced that, with its approval, strategic investors and fund managers who invest pools of consumer funds could acquire up to 10% of share-holding. SHAREHOLDING STRUCTURE As of June 2001, issued and paid-up capital of ASX summateed to A$106,282,000. afterward listing, ASXs shareholders rose from 606 to 16,313. Besides individual investors, the large domestic and international fund managers offer to ASX equity including Chase Manhattan Nominees Ltd. whose holding is 6. 9%, National Nominees Ltd. 3. 5%, followed by AMP Life Ltd. (2. %), Westpac Custodian Nominees Pty. Ltd. (2. 11%) and Citicorp Nominees Pty. Ltd. (2. 07%). The top 20 shareholders account for 27. 3% of issued capital. SGX has auth orized share capital of S$1,000,000,00. As of August 2001, its issued and paid-up capital stood at S$10,000,000. The top shareholders include SEL Holdings Pte. Ltd with 25% of pith shares (but owing to the restrictions in the exercise of votes attached to shares, SEL is not regarded as a substantial shareholder), Raffles Nominee Pte. Ltd. (12. 9%), followed by DBS Nominees Pte. Ltd. (9. 9%), Overseas-Chinese Bank Nominees Ltd. (5. 3%) and HSBC Singapore Ltd. and Citibank Singapore (each over 4. %), and others with significant stake in the range of 0. 60-2%. The top 20 shareholders account for 77. 8% of total shares. Out of the shares issued to SEL, the Company made an Initial Public Offer (IPO) and a private placement. The IPO raised S$470 billion. Consequently, the issued and fully paid share capital of SGX increased from S$61,670 as at 30 June 2000 to S$10 million as at 16 November 2000. HKEx has authorized share capital of HK$2,000,000,000. As of December 2001, issued and fully paid capital amount to HK$1,040,664,846. As of March 2002, the two Central Clearing and Settlement System (CCASS) Participants held 28. 8%, and 12. 1% of HKExs issued share capital.SFC granted approval to these two entities as minority controllers of HKEx on the basis that the shares are held in handcuffs for their clients. Hong Kong Exchanges and Clearing Limited (HKEx) Maximum shareholding limit is 5%. The Securities and Futures Commission (SFC), in consultation with the Finance Secretary, may give approval to a somebody to hold more than 5% where it can be demonstrated to be in the interest of the public or the investing public. Philippine Stock Exchange (PSE) The Securities Regulation Code imposes a 5% maximum shareholding limit for individuals and individual companies and 20% for industry or business groups. The demutualized PSE has an authorized capital stock of P36. million, with subscribed and fully paid-up capital base of P9. 2 million representing a portion of the member s total contribution of P286. 6 million as of 31 December 2000. Each of the 184 member-brokers was granted 50,000 common shares of the late PSE at a par value of P1. 00 per share. The remaining members contribution of P277. 4 million will be booked under additional paid-in surplus. Prior to demutualization, TSE had a capital of Y11,500 million. After demutualization, TSE raised it to Y22,874 million by way out 2,300,000 shares for equal allotment to its members. The total number of authorized shares after demutualization is 9,200,000. TSE now has 114 shareholders.Tokyo Stock Exchange (TSE) Under the Securities and Exchange Law, there is a 5% maximum shareholding limit. Source Stock Exchanges. Latest Annual Reports 10 Demutualization of Asian Stock ExchangesCritical Issues and Challenges Table 1. 2. Asian Stock Exchanges Legal and Corporate Structure STOCK EXCHANGE TSE LEGAL FORM TSE was demutualized on 1 November 2001 Legal status Company SGX was demutualized in December 1999 Leg al Status Company (for profit). Singapore Exchange Securities Trading Limited (SGX-ST), the stock exchange, is a wholly-owned subsidiary of SGX. HKEx was demutualized in March 2000 Legal Status Company (for profit) with the Stock Exchange of Hong Kong Limited (SEHK) set up as a wholly- owned subsidiary of HKEx.ASX was demutualized on 13 October 1998 Legal Status Company (for profit) lean STATUS Not listed (plans to list in FY2005) SGX On 23 November 2000, the Company was admitted for listing of SGX-ST. SGX became a public-listed company with 1,000,000,000 ordinary shares outstanding. HKEx Listed ASX ASX was listed on its own exchange on 14 October 1998. When ASX shares were quoted on 14 October 1998, they closed at A$4. 25 sub-sequently they rose as high as A$16 by 16 March 1999. By the end of 1999, they traded at a range of A$10 to A$11, valuing the company at between A$1 billion and A$1. 1 billion. Not Listed PSE PSE was demutualized in August 2001 Legal Status CompanySource Stoc k Exchanges. Latest Annual Reports needs vs. distribution to partners, taxation). In most jurisdictions, a limited liability company has been observed to be the traditional and preferred option for profit-making ventures involving more than a close group of partners. The methods for transforming an association into a limited liability company varies between jurisdictions, but in principle, the existing members agree to transfer the assets and operations of their association to a newly formed company, in exchange for shares in that new company. 11 Part I Issues Involved in Stock Exchange Demutualization 1. 5 Benefits of Demutualization of Exchanges 1. 5. Improvements in Corporate Governance Exchanges, when run as mutual associations, clubs and cooperatives of traders and brokers allow members exclusive rights of access to trading systems and platforms. Operating under this mutual structure, exchanges enjoyed quasi or full monopoly on trading and they derived profits from the intermed iation of nonmember transactions. Since members under the mutual structure were owners of the exchange, they imposed rights to trading and disallowed direct access to the trading floor to any outsiders. Brokers inadvertently resisted changes if these entailed additional costs, impairment of revenue or competitive threat.This resistance eventually impeded the ability of the company to react quickly to a rapidly changing market environment. Also, in some developing countries if the exchanges enjoyed a legal or official national monopoly, government-appointed officials and stakeholder representatives were often represented on the board. While in the short-term such appointments may have proved conducive to mitigating entrenched vested interests, in the long-run these can prove counter productive leading to blistery government interference. With the changing economics of automated auction trading and its aristocratic access electronically, the economics of member-cum-trading floor b ased exchanges has lost its merit.As a result, it has generated pressures to replace the age-old reliance on one member, one vote and the committee-based decision structure where control is vested with the interest groups that have exclusive rights of intermediation at exchange. Under demutualization, there is increased acceptance to separation of ownership from social status that automatically provides trading rights. This segregation helps introduce effective corporate governance if (i) there are accompanying improvements in the incentive structure,7 which allow the exchanges to sell their equity stakes to nonmembers and outsiders, (ii) decision making is based on this new ownership structure (not on rights of intermediation), and (iii) when there is an effective oversight of a governing board and a company structure. 7 Steill Ben 2002.Changes in the Ownership and Governance of Securities Exchanges Causes and Consequence. In Brookings-Wharton Papers on Financial Services. Washin gton D. C. Brooking organization Press. 12 Demutualization of Asian Stock ExchangesCritical Issues and Challenges Since under demutualization the economic ownership of the exchange is separated from trading membership, it is not appropriate that interest groups (such as the trading members) have exclusive authority over the decisions of exchange. After demutualization, some exchanges have granted less than 50% of the voting rights to the broker members on the board of the exchange (see Table 1. 3).To gradually decrease broker bias on the board, the exchanges have appointed independent directors or directors that are nontrading owners. After demutualization, the appointment of government appointed officials (a common feature of exchanges in developing economies) has by and large been viewed as controversial given that the demutualized exchange is a private sector company operating in a competitive environment. In environments where broker influences are often daunting, the continu ed role of the representative(s) of the securities regulator can support the transition of exchange till such time as the regulation is changed to allow the exchanges to operate in a fully competitive manner.Besides appropriate board representation, it is important that the management of the exchange is fully qualified and motivated to act not only in the beat out interests of the shareholders, but also to conduct the business in a responsible manner so as not to disrupt the orderly and fair trading in the capital markets. To ensure that this public interest is satisfied, fit-and-proper display of the board and management, similar to tests put in place in the banking regulations of many jurisdictions, could be undertaken. The management should be accountable to the board, which would determine managements appointment and remuneration, administer the strategic direction and audit the financial and operational results, including risk management, and if needed, effect the removal o f management.To ensure the effective supervision and auditing of management, it would seem prudent to ensure that a majority of board members are truly independent directors. To remain competitive, a stock exchange must follow international best practices in ethics and procedures. This is necessary in order to ensure that institutional investors do not shift their investments to other alternatives perceived to be more fair or secure. Therefore, it is in the profit-motivated exchanges best interest to ensure fair and transparent practices and, as such, good corporate governance needs to be an integral part of the exchange once it is driven by the profit motive. 13Part I Issues Involved in Stock Exchange Demutualization Table 1. 3. Asian Stock Exchanges Board Representation STOCK EXCHANGE ASX BOARD theatrical/COMPOSITION 9 member board of directors. Of ASXs 9 directors, 4 are ASX Members/ Affiliates. 11 member board of directors. Of SGX 11 directors, 4 represent broker interests. SGX plans to broaden membership base by attracting new international members both global and regional securities houses. In addition, SGX will be introducing a new membership structure that allows new and existing members to choose between trading-only membership or clearing-only membership or both trading and clearing membership. Central Depository Pte. CDP) clearing rules have been revised to incorporate the admission requirements and have to launch the new membership structure in the third dirt of 2002. The board comprises 8 Public Interest Directors appointed by the Financial Secretary to represent public and market interests, 6 Directors elected by shareholders, and the Chief Executive of HKEx who is an ex-officio board member. Pursuant to the Exchanges and Clearing Houses (Merger) Ordinance, the number of Public Interest Directors will be reduced to no more than the number of elected Directors immediately following the annual general meeting of HKEx in 2003. 51% of the board (8 of 15 directors) should be independent. 11 member board of directors, of whom 6 are outside directors. SGX HKEx PSE TSESource Stock Exchanges. Latest Annual Reports 1. 5. 2 Opening Up of Trading Rights of Exchanges Consistent with the for-profit motive, the demutualized exchanges in Asia have included provisions to admit new trading partners (Table 1. 4) and permitted eligible applicants (new customers) unrestricted commercial access to the services of exchange. Some exchanges, however, adopted a moratarium period on the issuance of new trading rights. If share ownership were a requirement for trading membership, it would be relatively easy for existing members to protect their market share by refusing to sell existing or issue any new shares, thus barring new entrants.If new shares can only be issued to the active trading members, then the public, financial institutions, institutional investors and others would broadly not be able to invest. The question of a broader ownership 14 Demutualization of Asian Stock ExchangesCritical Issues and Challenges Table 1. 4. Asian Stock Exchanges Trading Rights and Dividend for Profit-Seeking STOCK EXCHANGE ASX TRADING RIGHTS Trading rights may be acquired through application with ASX or from an existing Participant. Trading rights have to be acquired through application with SGX, as these cannot be secured through transfer from an existing member. In July 2000, SGX opened the securities market to new members, and five new member firms joined in 2000.SGX also changed its rules to allow a single legal entity to be a member firm in each of the securities and derivatives markets thereby furthering their members opportunities to trade in both markets. Access to the markets may be obtained through acquisition of trading rights from existing members of the exchanges and from HKEx after the expiry of a two-year moratorium on March 2002. Trading rights issued by HKEx (other than those automatically conferred to the exchange share holders on the effective date) will not be transferable. For a further period of 2 years thereafter, no new trading rights will be issued for less than HK$3. 0 million per Stock Exchange Trading Right or for less than HK$1. 5 million per Futures Exchange Trading Right.An entity may acquire trading right from an existing trading participant (with approval of TSE), or through application with TSE. Trading right can be acquired through purchase from an existing trading participant. PSE temporarily imposed a moratorium on the issuance of new trading rights and limits it to its present number of 184, transferable for an straight-out period of time. PAYOUT RATIO 70% of net profit after tax. 85% SGX HKEx 46% TSE n. a. PSE n. a. Source Stock Exchanges. Latest Annual Reports base of the exchange (as a public listed company) is critical in situations where exchanges need to raise funds for future investments. Broader ownership would help avoid potentially large swings in the value based on t he trading of a limited number of shares only.With share ownership separated from the right to trade, the question of the compensation of existing trading members arises especially since trading rights are granted freely to new members when the existing 15 Part I Issues Involved in Stock Exchange Demutualization members had to acquire their trading memberships. If existing shareholders continue to retain their shares, then they would enjoy the trading rights granted to the shareholders and there would be no need to compensate them for trading rights. This is argued largely because for both the old and new shareholders, the economic value that the shares now represent would always be inclusive of the right to trade provided such rights have been granted.In order for shares to have economic value, there must be an expectation of dividends, at some point in the future. The introduction of a dividend policy (which does not exist in mutual exchanges), coupled with a listing of the shares , thus transfers the value of stock exchange share ownership from the right to trade, to the right to receive dividends and trade the shares (see Table 1. 4). These factors should in theory minimize the resistance to the demutualization of exchanges by the brokers. However, a moratorium (limited in time) on the granting of new trading rights has often been introduced to lessen the competitive match on smaller brokers. 1. 5. Restructuring and Alliances of Exchanges After being demutualized, most exchanges have revisited their commercial strategy to improve viability and enhance business prospects. Exchanges have opted to (i) consolidate, merge and/or integrate their domestic markets (ii) build alliances by establishing cross-border linkages with other exchanges within or outside the region and (iii) merge with other exchangesa phenomena more prevailing thus far in Europe. In Asia, the exchanges have by and large opted thus far for (i) and (ii). Emphasis has been largely to re-group businesses to broaden the markets, offer issuers and investors cave in distribution networks and improved liquidity.Predominant in-country mergers or restructuring have taken place in Singapore, Hong Kong, Australia and Japan, and in early 2002, the Kuala Lumpur Stock Exchange (KLSE) merged with MESDAQ (Table 1. 5). In-country restructuring of exchanges has involved (i) Merger of two or more exchanges into a single viable nationallevel company, which would be of sufficient scale to be an interesting partner for other (foreign) exchanges, and as a listed company for investors to consider. While these mergers lead to 16 Demutualization of Asian Stock ExchangesCritical Issues and Challenges Table 1. 5. Asian Exchanges Mergers and Alliances STOCK EXCHANGE TSE MERGERS PRIOR TO DEMUTUALIZATION Hiroshima and Niigata Stock Exchanges merged with the TSE in March 2000. ALLIANCES W