Parallel, Surabaya exchanges go ahead with merger plan

JAKARTA (JP): PT Bursa Parallel Indonesia (BPI) and the Surabaya Stock Exchange (SSE) are going ahead with their merger plan despite their thorny relationship with the Jakarta Stock Exchange (JSX), executives said yesterday.

"Whatever the results of the negotiations with JSX, we are going ahead with our merger plan and we are confident that the new market will be able to survive and grow," SSE's president, Basjiruddin A. Sarida, said at a seminar on the prospect of Indonesia's stock markets after the merger of BPI and SSE.

Basjiruddin noted that the two bourses will conduct a joint shareholders' meeting on June 24 to form the planned new stock market and elect its board of directors.

The planned market, to be headquartered in Surabaya, East Java, will be set up with a paid-up capital of Rp 7.9 billion (US$3.5 million), with each shareholder holding one share worth Rp 75 million.

In yesterday's seminar, which was conducted by the Stock Market Supervisory Agency and the Jakarta chapter of the Association of Indonesian Journalists, Basjiruddin was accompanied by the president of BPI, Tito Sulistio, and president of the JSX, Hasan Zein Mahmud. The seminar was opened by the agency's chairman, Bacelius Ruru.

Ruru noted that if the two parties -- JSX on one side and SSE and BPI on the other side -- could not reach agreements on some matters, the government might intervene.

The process of the merger has been slow because the two parties have differed on the future relationship between the planned merged market and JSX.

BPI and SSE want their relationship with JSX be a complementary one, meaning that they will share their market -- the merged exchange will serve small and medium-sized companies and act as a bridge for those wanting to list on the JSX.

Tito noted in his presentation that the two companies want the complementary relationship with JSX because the merger is not merely aimed at unifying the two exchanges but also to redesign Indonesia's capital market operations.

Better service

Yesterday, Hasan agreed with the two bourses' proposal on the complementary relationship, saying that it would better serve the country rather than making an open competition. JSX had initially wanted its relationship with the merged market to be one of open competition.

"We have no reason not to support the merger of BPI and SSE because it will create more efficient capital market operations in Indonesia. The problems are purely technical," Hasan said.

According to Basjiruddin, the thorny issues JSX could not yet accept include matters on single listing and cross trading, as well as on the split of incomes from listing fees.

The single listing requirement would make JSX lose 98 of its clients, which are categorized as small and medium enterprises, with a paid-up capital of less than Rp 25 billion.

"Although the financial losses might not be so great for JSX, losing 98 of its share issuers would damage its image as an international-class stock exchange. So, I can understand it's going to be difficult for JSX," Basjiruddin said.

He suggested that the single listing principle be executed gradually or applied for the new share issuers only because the 98 companies might not want to be forced out of the prestigious JSX.

JSX was formed by the government in the late 1970s, to spearhead the country's stock market operations, and was privatized in 1992. JSX is leading, in terms of trading activities, over the two exchanges because investors and share issuers are favoring JSX.

BPI was established in 1990 by the Association of Money and Securities Traders as the first over-the-counter capital market in Indonesia, while SSE was formed in 1989 as the first privately-owned stock market in Indonesia and the only stock market located outside Jakarta.

Marzuki Usman, JSX's chief commissioner, suggested that Indonesia have only one stock market. "Why not merge the three stock exchanges into one so that we can create the strongest stock market in the region."

Sharing Marzuki's suggestion, Hasan noted that the merger between SSE and BPI might serve as a bridge to one single stock market in Indonesia.

"A single stock market will create even more efficient stock trading activities. And I support the idea of having only one stock exchange for Indonesia," Hasan said. (rid)