KASE proposes aligning the exchange's governance structure with international practices

The Management Board Chairman of the Kazakhstan Stock Exchange Adil Mukhamejanov spoke at a roundtable discussion of development of Kazakhstan's capital market.

The key point of the speech: KASE has long possessed many delegated regulatory powers adopted in international practice. The exchange admits members to trading and defines requirements for them, maintains listings, monitors trading in real time and applies measures for violation of the exchange rules. It is proposed to align the governance structure with this scope of functions, in line with recommended international practices, primarily IOSCO's Principles for Regulation of Securities Markets (Principle 9), requiring separation of regulatory function from commercial interests.

The discussed structure assumes creation of the exchange's regulatory committee with four areas of responsibility: approval of internal documents of the exchange and its subsidiary infrastructure organizations; admission of issuers and exchange members and monitoring of them and trading; review of inspection materials and application of disciplinary measures, as well as arbitration to resolve disputes between market participants with involvement of industry expertise.

"The committee's value lies not in its list of powers - the exchange already performs many of its functions. The value lies in the fact that these powers will be transferred to a body separate from the commercial unit", noted the KASE's Management Board Chairman.

Expected effects include improved market oversight and market discipline, increased speed and flexibility of the rule-making process regarding the exchange rules and increased trust among international market participants.

The target model for KASE is that of a strong SRO exchange, used, for instance, in Malaysia, Singapore, Korea, Japan, Brazil and India. The transition is envisioned in stages: formation of the committee, consolidation of existing regulatory functions under a single mandate and subsequent expansion, separately for each function, following a readiness assessment. The committee's activities will be overseen by an authorized body, including the right to veto its decisions and public annual reporting.