SAADS PART

Definition:
A stock exchange, (formerly a securities exchange) is a corporation or mutual
organization which provides "trading" facilities for stock brokers and traders, to trade
stocks and other securities. Stock exchange is a highly organized market where securities
are purchased and sold.
OR
A stock exchange, share market or bourse is a corporation or mutual organization which
provides facilities for stock brokers and trader s, to trade company stocks and other
security.
Stocks in publicly traded companies are bought and sold at a stock market (also known as a
stock exchange). The Karachi Stock Exchange (KSE) is an example of such a market.

Karachi Stock Exchange:

Karachi Stock Exchange (KSE) is the biggest and most liquid exchange in Pakistan with
the average daily turnover of 525.15 million shares and market capitalization of US $
54.28 billion.

History:Karachi Stock Exchange was incorporated on March 10, 1949; it is the premier
Stock exchange of the country. It was started with 5 companies that had a paid up capital
of Rs. 37 million, the trading was done through an open-out-cry system.
The first index was the KSE 50 Index. Karachi Stock Exchange is the biggest and
most liquid exchange and has been declared as the Best Performing Stock Market of the
World for the year 2002.
KSE has been well into the 4th year of being one of the Best Performing Markets
of the world as declared by the international magazine Business Week. Similarly the
US newspaper, USA Today, termed Karachi Stock Exchange as one of the best
performing bourses in the world.

 Vision:To be a leading financial institution, offering efficient, fair and transparent securities
market in the region and enjoying full confidence of the investors.

Nature of the Karachi Stock Exchange:

Although initially the Karachi Stock Exchange was a physical exchange where
trading took place by an open outcry system, now the Karachi Stock Exchange is fully
automated.
The membership in the Karachi Stock Exchange is limited. Only 200 individual and
corporate entities can register as members in the KSE. In 2005, 162 members traded
actively on the Exchange. In addition, foreign corporate entities may also become the
members of the KSE with the condition that the nominee member of the company is a
citizen of Pakistan.

Functions of Karachi Stock Exchange:

Established for the purpose of assisting, regulating and controlling business of
buying, selling and dealing in securities.
Provides a market for the trading of securities to individuals and organizations
seeking to invest their saving or excess funds through the purchase of
securities.
Provides a physical location for buying and selling securities that have been
listed for trading on that exchange.
Establishes rules for fair trading practices and regulates the trading activities
of its members according to those rules.
The exchange itself does not buy or sell the securities, nor does it set prices
for them.

ABBASS PART
Products & Services:

KSE offers a range of products to its brokering members through a state of the art
technology infrastructure. Market participants (both local and internationally based
investors) are provided access to these products through various distribution channels of
the brokerage houses.
KSE trading products:
KSE trading products include:
Ready Market:
A conventional stock market also known as the regular market, where buyers and
sellers come together to trade shares. Settlement of trade occurs 2 days after the
trade.
Cash Settled Futures:
A standardized contract, to buy or sell a certain underlying instrument at a certain
date in the future, at specified price. All settlement occurs purely on cash basis.
Depending on the contract, settlement occurs 30, 60 & 90 days after the contract
is purchased.
Stock Index Futures:
Stock Index Futures are traded in a number of contracts. Each contract is to buy or
sell a fixed value of the index. Stock Index Futures Contract occurs 90 days after
the contract is purchased.
Deliverable Futures:
Forward contracts to buy or sell a certain underlying instrument with actual
delivery of the underlying instrument occurring. Settlement occurs 30 days after
the contract is purchased.
- CFS (discontinued)
- COT (discontinued)
KSE new Products in the year 2009-2010
KSE plans on introducing new Products in the year 2009-2010

Trading based on Sector indices

Exchange Traded Funds
Bond Trading
Options

The KSE also offers a number of data products and services providing both historical and
live data feed to customers. Additional services offered to customers by organization
include:
Technology services by KSE I.T. help desk
Customer Services & Investor Relations Services to help resolve investor
complaints and queries

 Investor Education Programs

How to become a Member?

Membership of KSE is limited and fixed at 200 and prospective members have to
purchase a seat from existing members

Two types of memberships :

Individual membership
Corporate members

Criteria for individual membership:

No person shall be eligible to be admitted as Member, if:
a. He/she is less than 21 years of age;
b.
c.
d.
e.

He/she is not a citizen of Pakistan;

He/she has been adjudicated as Bankrupt
He/she has been convicted of an offence involving fraud or cheating
He/she is associated with, or is a member of, Organization, Institution,
Association in Karachi where dealings in Securities
f. He/she has been at any time expelled or declared a defaulter by any Stock
Exchange
g. He/she has been previously refused admission to the membership of any Stock
Exchange unless a period of six months has elapsed from the date of such refusal;
The applicant should be an income tax or wealth tax assesses or borne as an assesses
on the register of income tax/wealth tax.
The minimum qualification for an applicant for the Membership shall be
"Graduation".
The applicant should have sufficient knowledge of stock market business.
Reference from a scheduled bank in addition to other references as disclosed in the
Membership form.

Criteria for corporate membership:

The Corporate Body applicant for membership

must be a company or a statuary corporation or a body corporate;

Have a minimum issued and paid-up capital of Rs. 20 million.

According to section 183 of the companies Ordinance 1984 applies; the

membership application shall be accompanied by a "no objection" from the
Federal or Provincial Government
The Nominee Director representing Corporate Membership must be a citizen of
Pakistan.

At least two Directors of the corporate membership including the Chief Executive
must have a minimum academic qualification of "Graduation".

The membership application shall be accompanied by an auditors certificate

confirming that the company maintains a net capital balance/net assets value of at
least Rs. 2,500,000/-

The Chief Executive and Nominee Director must have at least 3 years stock
market experience.
In case the equity of the company is subscribed by foreign participants; No
Objection Certificates from State Bank of Pakistan and Ministry of Finance; is to
be furnished.

KUMAILS PART
Settlement:
The settlement in the Karachi Stock Exchange takes place through the centralized
clearing house. The shares that are traded from the Karachi Stock Exchange on Monday
and Tuesday of any week are settled the following Monday. The payments that are made
to the members or the investors are channelized through the Clearing House.

The shares of only those companies can be traded in the Karachi Stock Exchange which
has offered the shares to the public either through the prospectus or an offer for sale. The
trades in the Karachi Stock Exchange are settled through the weekly clearing system.

Trading:
The exchange has
Pre-market sessions from 09:15am to 09:30am.
Normal trading sessions from 09:30am to 03:30pm.
It is the second oldest stock exchange in South Asia.
The Karachi stock exchange has undergone a considerable deal of downturn partly due to
global financial crisis and partly on account of domestic troubles. It remained suspended
in excess of 4 months and resumed normal trading only on December 15, 2008. The KSE
100 Index and KSE 30 Index after hitting the low around mid January has now re
bounced and recovered 20-25% .

FUTURE PLANS OF KSE

The following are in process:

Demutualization of the Exchange publically listed with

strategic investor
Promotion of Derivative Products
New Services (Data Vending)
Debt Market Trading Platform
Investors education programs (road shows, seminars &
online training)

KSE Play a key Role In Pakistans Economy:

The KSE is one of Pakistans largest tax payer and in the fiscal year 2006- 2007
contributed over Rs. 4 billion towards the national exchequer.

Listed Companies contribute over 10% of total revenue collected by the

Government of Pakistan.
KSE brokers on average pay more than 50% of their profit before tax as
presumptive tax.
KSE investors pay 10% tax on dividends.

Qambers slides:
Slide 1:
How does an investor trade at kse?

Trading is carried out for the two main items

1. Shares: Shares are partial-ownership of the company in which they have
bought shares and investors can buy and sell their shares on the stock exchanges.
2. Commodities: Are raw or primary products of exchanged. ex (food items,
stocks ,bond currency , metals and electricity)

Slide 2 : Requirements:
The exchange has pre-market sessions from 09:15am to 09:30am and normal trading
sessions from 09:30am to 03:30pm. Trading is carried out for both individuals and
corporate clients
Individuals
A copy of the civil identification card.
fill out the account opening form, sign it, and then get it certified by your bank.
A fee
Choose one of the registered Brokerage Firms in KSE.
Corporate Clients
A copy of the civil identification card.
fill out the account opening form, sign it, and then get it certified by your bank.
A fee
Copy of Commercial Registration record
Copy of Company's license
A List of authorized signatory certified by the bank.
Choose one of the registered Brokerage Firms in KSE.

Slide 2 continued: How to start trading?

When issuing a selling order, share certificates should be presented the following
day after the transaction.
When issuing a buying order, payment should be submitted to the broker the
following day before 11:00 am .
Commission is calculated for transaction of 50 Thousand KD and above.
A cheque will be issued by Kse in favor of the client .
KSE account is accredited 500 fils for each executed transaction.
Share prices can fluctuate 5 pricing units daily according to its category. Please
refer to the following table:

Slide 3: Legal authority :

Legal Framework

The securities market and the corporate sector are regulated by the provisions of
the Companies Ordinance 1984.
The Securities and Exchange Ordinance 1969 and Rules framed there under in
1971.
There are also Federal legislations relating to specific areas like
- Monopolies and Restrictive Trade Practices (Control and Prevention)
Ordinance, 1970.
- Investment Companies and Investment Advisors Rules 1971.
- Modaraba Companies and Modaraba (Flotation and Control) Ordinance,
1980.
- Companies (Issue of Capital ) Rules 1996.
- Leasing Companies (establishment and Regulation) Rules 1996.
- Asset Management Companies Rules 1996.
- Insurance Companies Ordinance 2000.

In addition to above, the listed companies are also subject to the Rules and
Regulations of
the stock exchanges.

NCCPL

National Clearing Company of Pakistan Limited (NCCPL) is a significant institution of

Pakistan's Capital Market providing clearing and settelment services to all three stock
exchanges in the country.

CDC
Incorporated as a public limited (Unlisted) company in 1993,
Central Depository Company of Pakistan Limited (CDC) is the only depository in
Pakistan. The Company started operations in September 1997. CDC is the sole entity
handling the electronic (paperless) settlement of transactions carried out at all three stock
exchanges of the country. Through efficient functioning of CDC, approximately 99% of
the market settlement is in book entry form.

BHARATS PART
SECURITY AND EXCHANGE COMMISION
OF PAKISTAN
The SECURITY AND EXCHANGE COMMISION OF PAKISTAN (SECP) was
established under the security an exchange commission of Pakistan act, 1997 for the
beneficial regulation of capital markets, supritendence and control of corporate entities
and for matters connect therwith.

The Role of SECP in Pakistan

Regulating the issue of Securities
Regulating the business in Stock Exchange and Other securities
markets
Monitoring the Capital Markets
Registering
Prohibiting Fraudulent and Unfair Trade Practices
Promoting Investors Education and Training
Calling for Information and Undertaking Inspection
Suggesting Reforms of Law
Encouraging the Development
Regulating the Insurance Business
Maintaining the Investors confidence
Disclosure of Information to the Public
Settlement of Disputes

Karachi Stock Exchange Indices:

Stock indices:A stock index is a method of measuring a section of the stock market. There are two
big indices used in Karachi Stock Exchange.
The Karachi Stock Exchange uses the following index:
50 Shares Index- This index was used initially but as the market grew there was
a need for a new index.
KSE-100: The KSE-100 is a benchmark used to compare prices over a period of
time. For the construction of the KSE-100 companies with the highest market
capitalization. To make the selection more representatives, the companies from all
the sectors are chosen. The index was introduced in 1991 with 1000 as base
points. By 2001 it has grown to 1770 points, in 2005 to 9989 points and reached a
peak of 12285 by 2007. The KSE-100 is a capital weighted index comprised of
100 companies.
KSE-30: This index was introduced at the end of 2006. It is comprised of 30 most
floating stocks. By 1997 the KSE-30 traded at 14199 points.
KMI-30

Introduced in September 2008

KMI comprises of 30 Companies that quality the

KMI Shariah screening criteria and are weighted
by float adjusted market capitalization.
12% cap on weights of individual securities.
Rebalancing of the Index will be done bi-annually.
Shariah Supervisory Board of Meezan Bank
chaired by eminent Shariah scholar Justice (Retd.)
Mufti Muhammad Taqi Usmani.
A total return Index based on free float
methodology

The objective of KSE-Meezan Index (KMI) is to serve as a

gauge for
measuring the performance of Shariah
compliant equity investments. It may also act as a
research tool for a Impact Costiety of purposes in the
strategic asset allocation process. Besides tracking
performance of
Shariah compliant equities, its
construction will increase investor trust and enhance
their participation.