Demutualization and Stock Market Efficiency: A Study upon Asian Economies


Area of Research:

Economics, Financial & Banking

Proposed Analysis Title for the Degree of Expert of Financial by Analysis -------------------------------------------------

The Dynamics of Stock Market Demutualization and Its Interaction with Wall street game Efficiency: Important Assessment from the Performance of worldwide Demutualized Industry, Lessons Discovered and Coverage Implications for Bangladesh



Learn by Study Candidate

Maryland. Abdullah Raihan

Assistant Mentor of Economics

International Islamic University Chittagong

Date of Submission

fifteenth February, 2013

1 . Advantages and Problem Statement

The demutualization of stock exchange is a recent new phenomenon inside the spare of worldwide financial world with a great approximately twenty years, meaning that until the early 1990s; most of the community stock exchanges were not profit, common organization with monopoly power, owned by their members (Islam& Islam, 2012). The demutualization of an exchange is a method by which a non-profit member-owned organization is transformed into a for-profit aktionar corporation. Control is to some extent open (WFE Survey, 2005). IOSCO (2000) defines demutualization as the transformation associated with an exchange into a for-profit shareholder-owned company. The pace of exchange demutualization in designed market jurisdictions has been quite rapid. Inside the fifteen years since the initially exchange demutualization took place in 1993 in Stockholm, Swiss, 21 exchanges in created market jurisdictions have demutualised – which represents almost 40% of the regular membership of the World Federation of Exchanges (WEF, 2003). In contrast, the pace of demutualization in emerging marketplace jurisdictions has become relatively reduced.

Available books found that a demutualized exchange can borrow from conventional lenders such as banks. Whereas mutualized stock exchanges have to admire their guarantor for funds (Ahmed in al,, 2011). To borrow from a bank, stock exchanges have to boost their financial guidelines in order to increase the credibility in the exchange which will enhances the business governance. Beyond the advantages talked about above, entry to human capital is also a crucial outcome of demutualization. Very good governance and access to economic capital support exchanges to draw better certified human resource (Faina and Lopez, 2006). Specialists will help to have better decisions. Better managing would could also increase the efficiency of the exchange by introducing better techniques and plans (LSE, 2007). Demutualization would also enhance the profit purpose for growth and development. After demutualization exchanges have to earn their own bread and butter.

2 . Motivation and Contribution

In Bangladesh, Stock indices are directed by elected physique of share brokers wherever conflict of interest takes place (Alam, 2012). There is not of very good corporate governance in the Inventory Indices that may be an important explanation of recent debacle of stock market (Ibrahim, 2011). Since stock retailers and broker agents are familiar as institutional investors and play a large rule in the capital market mechanism, they should be regulated correctly. In Bangladesh, DSE perform inspection on brokerage homes and DSE is also work by a chosen committee of brokerage home, so one cannot expect proper common sense from the DSE. Study found that by all the leading investors happen to be brokerage properties who are mostly monitored simply by DSE that creates many conflicts of interests. So , if broker houses make any big irregularity, DSE is supposed to hide it as it a member of DSE. Completely, many positive factors along with regulatory supports (SEC, DSE) overpriced the market and ultimately caused big losses pertaining to general shareholders. In case of irregularities (serial Trading, price manipulation) by brokerage houses/members, DSE had did not make any proper exploration and also failed to...

References: Ibrahim Khalid Panel sharer ubung Report, Bangladesj 2011. (

Alam, H., G., S i9000 (2012) " Recent Trends in Capital Market of Bangladesh: Essential Evaluation of Regulation”. Master Thesis, Cookware Institute of Technology School of Managing Thailand, Might, 2012

Islam, M., S., (2012) Euro Journal of Business and Management ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol 3, No . doze, 2011

Universe Federation of Exchanges (WEF), Annual Report and Statistics, 2003

IOSCO EMC WG2 survey (2000)

Ahmed, S i9000., Butt, N., Z., ( (2011) Africa Journal of Business Administration Vol. 5(2), pp. 448-454, 18 January, 2011 Available on the web at DOI: twelve. 5897/AJBM10. 587 ISSN 1993-8233 В©2011 Academic Journals

Faina A, Lopez RJ (2006). Market access and man capital build up: The European Union Circumstance, Appl. Econ. Letters, 13(9): 563-567.

LSE (2007, May). Demutualization. LSE Newsletter



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