Latin American Capital Markets

276 ROBERTA S. KARMELited 1996). However; according to the Hogan, Stokes Report, in a more competitiveclimate, the value of mutual ownership as a means of controlling market power wouldbe diminished. 7 Furthermore, it would be more difficult for a mutual as opposed to acorporate organization to make contentious business decisions under the time pressurescreated by competition. The Hogan, Stokes Report therefore recommendedchanging to a corporate structure to enable the Australian Stock Exchange to operatemore effectively as a business under growing competitive pressure and to reducethe potential for growing inequities among the owners of a mutual. The report alsorecommended listing corporatized exchange shares on the Australian Stock Exchange.The Amsterdam Stock Exchange merged with the Amsterdam options andfutures exchanges and then demutualized in order to strengthen its commercial thrustin the face of increased international competition. 8 It believed that it was necessaryto organize the Amsterdam exchanges as a business in order to change their culturefrom a civil service type of organization to one primarily driven by business objectives(Hogan, Stokes Pty Limited 1996).These changes paved the way for the subsequentmerger with the Paris and Brussels stock exchanges.Issues Related to DemutualizationDemutualization creates a number of issues and trade-offs, most of which are linkedwith the self-regulatory nature of stock exchanges and the ensuing conflicts of interest.Conflicts of InterestOne of the more contentious issues under discussion is the future of self-regulation.Questions concerning the ability of exchanges to enforce their regulations againstmembers and listed companies have focused on the conflicts of interest involved, butdemutualization raises these questions in a new context.The issue is whether a commercialentity carrying on the business of running an exchange and seeking to protectand promote its business can continue to support the integrity and efficiency ofthe trading markets by setting and enforcing appropriate regulations in the publicinterest (IOSCO 2000). It can be argued that there would be conflicts of interestsbetween shareholders and members in a demutualized exchange environment that7 Hogan, Stokes Pty Limited (1996).8 Prospectus, AEX, February 20, 1997, p. 16.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub