DEMUTUALIZATION OF STOCK EXCHANGES: PROBLEMS, SOLUTIONS AND CASE STUDIES

자료: http://www.set.or.th/setresearch/files/demutualization/ResearchPaper_2002_ADB.pdf

© Asian Development Bank 2002

Edited by SHAMSHAD AKHTAR

Director,
Governance, Finance and Trade Division,

East and Central Asia Department,
Asian Development Bank


※메모:

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 membership can be achieved. Sequentially, it involves conversion of
existing member seats by monetizing these and assigning a certain value per seat. Once the valuation is done, the members can opt to convert their membership 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 membership 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.
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Membership may be open to any persons who satisfy stipulated requirements or it may be closed. If membership of an exchange is acquired through seats on the exchange, the seats are usually not freely transferable.
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TSE became the Toronto Stock Exchange Inc. (TSE Inc.), a for-profit corporation. Each member of the pre-demutualization TSE received 20 common shares of TSE Inc. per seat. Each common share carries one vote; however, the new corporation’s by-laws prohibit any person or combination of persons acting jointly to beneficially own or control more
than 5% of TSE Inc. without the prior approval of the Ontario Securities Commission.
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Today some exchanges have been transformed into for-profit shareholder-owned companies and many more are considering such a demutualization. Some demutualized exchanges have become public companies and listed on their own or other boards. Others have remained privately held companies but intend to go public in the future. This
chapter will discuss the United States experience and perspective with regard to why exchanges and similar entities have demutualized, how seats are transformed into shares and post demutualization models.
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Also, before the merger of the exchanges, the two Exchanges performed four different roles (market operator, membership association, regulator and public body) that, sometimes in practice, conflicted with one another, compromised their conduct and, to a certain extent, impaired their overall performance. The growth of the securities market
was impeded by restrictions on access, including the maximum number of trading seats available.
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Membership is a prerequisite to exchange market access. Only members have permission to purchase trade seats in stock exchanges and access to the central match computer system. Every member should purchase at least one trading seat. Currently, there are 5,391 seats in Shanghai2 and 1,545 in Shenzhen. Trading seats can be transferred among
members.