Financial

Institution
The Karachi Stock
Exchange

“Empowering The
Companies of Tomorrow”
Group Members ;

Syed Owais Ali (SP07-BB-0135)

M. Moez Siddiqui (SP07-BB-0124)
M. Laraib (SP07-BB-0082)
Vinod Kumar (Sp07-BB-0177)
Shahbaz Nawaz (Sp07-BB-0150)
What is Stock Exchange?

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.
 History

In 11th century France the courtiers de change were

concerned with managing and regulating the debts of
agricultural communities on behalf of the banks. As these
men also traded in debts, they could be called the first
brokers.

In the late 13th century commodity traders in Bruges

gathered inside the house of a man called Van der Burse,
and in 1309 they institutionalized this until now informal
meeting and became the "Bruges Bourse".
On May 17, 1792, twenty-four supply brokers signed the
Buttonwood Agreement outside 68 Wall Street in New
York underneath a buttonwood tree.

On March 8, 1817, properties got renamed to New York

Stock & Exchange Board. In the 19th century,
exchanges (generally famous as futures exchanges) got
substantiated to trade futures contracts and then
choices contracts.
 Some Major Stock Exchanges
Twenty Major Stock Exchanges In The World: Market Capitalization & Year-to-date Turnover at the end of January 2009

Region Stock Exchange Market Value

(millions USD)
Total Share
Turnover
(millions USD)
Africa Johannesburg Securities Exchange 432,422.1 17,999.7

Americas NASDAQ 2,203,759.6 2,325,238.3

Americas São Paulo Stock Exchange 611,695.0 30,748.5

Americas Toronto Stock Exchange 997,997.4 84,323.0

Americas New York Stock Exchange 9,363,074.0 1,517,615.7

Asia-Pacific Australian Securities Exchange 587,602.7 37,400.1

Asia-Pacific Bombay Stock Exchange 613,187.6 14,425.0

Asia-Pacific Hong Kong Stock Exchange 1,237,999.5 80,696.8

Asia-Pacific Korea Exchange 470,417.3 81,755.0

 Region Stock Exchange Market Value
(millions USD)
Total Share
Turnover
(millions USD)
Asia-Pacific National Stock Exchange of India 572,566.8 39,057.1

Asia-Pacific Shanghai Stock Exchange 1,557,161.3 142,144.2

Asia-Pacific Shenzhen Stock Exchange 389,248.3 75,365.5

Asia-Pacific Tokyo Stock Exchange 2,922,616.3 301,781.5

Europe Euronext 1,862,930.9 146,173.3

Europe Frankfurt Stock Exchange (Deutsche 937,452.9 264,970.3

Börse)
Europe London Stock Exchange 1,758,157.7 241,151.1

Europe Madrid Stock Exchange (Bolsas y 871,061.4 114,994.0

Mercados Españoles)
Europe Milan Stock Exchange (Borsa Italiana) 456,206.7 48,094.8

Europe Nordic Stock Exchange Group OMX 503,725.8 55,299.9

Europe Swiss Exchange 761,896.1 63,435.6

KSE – Yesterday, Today and
Tomorrow
An Overview
 KSE Yesterday

• Incorporated on March 10, 1949

• Premier Stock exchange of the country

• Started with 5 companies that had a paid up capital of Rs. 37 million

• Trading was done through an open-out-cry system

• The first index was the KSE 50 Index

 KSE Today

• Exchange owned by 200

members

• 652 companies listed

• 4 indices

• Modern Risk Management

System
•Var Based Margin
•Pre Trade Margin Verification

• KSE is FIX Compliant

•Electronic Trading through KATS

• Market capitalization*:
US $ 54.28 billion
 KSE Tomorrow
• Publicly Listed Company with
strategic investor

• Products to include:
• Options
• ETFs
• Tradeable Sector Indices
• Debt Market Trading

• Broad based investor

participation

• Cross border listings of

companies

• Opening up of branches in
other cities and in the region
Karachi Stock Exchange

 Founded in 1947, it is Pakistan's largest and oldest stock

exchange, with many Pakistani as well as overseas listings.
 Its current premises are situated on Stock Exchange Road, in
the heart of Karachi's Business District.
 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”.
KSE & its Employees

• A strong management team has been inducted with over 100

years of combined experience in the capital markets

• Focus on Staff Training and Professional Development

Programs

• Recruitment from leading universities and organizations

• Gender Diversity
• Internships
 KSE & the Government

 Large public sector organizations have been privatized over the

years through the capital markets as this offers an efficient,
fair and transparent manner for Government divestment.
 Privatization & other capital market transactions of state owned
entities since 1991 have yielded approximately Rs. 475 billion
to the exchequer.
 The Capital Markets were amongst the largest tax payers
during the period 2002-08.
 Rs. 4.67 billion collected in trading taxes during 2007-08.
 Growth
 As of December 20, 2007, 671 companies were listed with the
market capitalization of Rs. 4364.312 billion (US$ 73 Billion)
having listed capital of Rs. 717.3 billion (US$ 12 billion). On
December 26, 2007, the KSE 100 Index reached its ever highest
value and closed at 14,814.85 points.

 Foreign buying interest had been very active on the KSE in 2006
and continued in 2007. According to estimates from the State
Bank of Pakistan, foreign investment in capital markets total
about US$523 Million.

 According to a research analyst in Pakistan, around 20pc of the

total free float in KSE-30 Index is held by foreign participants.
 Karachi stock exchange Board of Directors has recently
(2007) announced plans to construct a 40 story high rise KSE
building, as a new direction for future investment

 KSE began with a 50 shares index. As the market grew a

representative index was needed. On November 1st, 91 the
KSE-100 was introduced and remains to this day the most
generally accepted measure of the Exchange.

 Karachi Stock Exchange 100 Index (KSE-100 Index) is a

benchmark used to compare prices overtime, companies with
the highest market capitalization are selected.
Role and Functions of
a 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.
Fair
The exchange assures that no investor will have an undue
advantage over other market participants.
Efficient market
This means that orders are executed and transactions are settled
in the fastest possible way.
Doing business
People who buy or sell stock on an exchange do so through a
broker.
The broker takes your order to the floor of the exchange looks
for a broker representing someone wanting to buy/sell. If a
mutually agreeable price is found the trade is made
Transparency

 Investor make informed and intelligent decision about the

particular stock based on information.
 Listed companies must disclose information in timely,
complete and accurate manner to the Exchange and the
public on a regular basis.
 Required information include stock price, corporate
conditions and developments dividend, mergers and joint
ventures, and management changes etc.
 KSE has 4 Indices
KSE 100
 Most widely reported Index
 Representation of all Sectors of the Exchange
 Consists of 100 companies representing 85% of total
market capitalization of the exchange

KSE 30
 Introduced in 2006
 Based on the “Free Float Methodology”
 Includes only the top 30 most liquid companies listed on
the KSE
 Largest 30 free float market capitalization companies
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

All Shares
 Is a capital weighted index and consists of all companies
 Listing Procedures

 Equity Listing on Normal Counter

 Listing on Over-the-Counter (OTC)
 Listing of Long Term Debt Instruments, both Listed & Non-
Listed Companies
 Listing of Short Term Debt Instruments, both Listed & Non-
Listed Companies
 Listing of Closed-End Mutual Funds
 Listing of Open-End Mutual Fund
 Listing of Different Kinds & Classes of Shares
Major Requirements of Listing include:

Minimum paid up capital of Rs. 200 million for a company seeking

listing

• To succeed public offer of equity, it has to be subscribe by at

least 500 applications

• Provisions of Listing Regulation 6-A relating to minimum fresh

public offering through prospectus as well as the minimum
public offering requirements by way of Offer For Sale as laid
down under the Companies (Issue of Capital) Rule, 1996.
• The offering document has to be cleared by KSE before it is
submitted to the Securities & Exchange Commission of
Pakistan for approval.

• The company seeking listing is required to fulfill the relevant

requirement of the Exchange under the Listing Regulations
and the disclosures as required under the Second Schedule
of the Companies Ordinance 1984 & Companies (Issue of
Capital) Rules, 1996.
 Simple Admission and Listing Fee
Application made along with prescribed Documents and Fees to
KSE;

For Fees –
Initial Listing Fee:
1/10 of 1% of the paid-up capital (subject to a maximum of Rs.
1.5 million.

Annual Listing Fee (companies having paid-up capital of):

Upto Rs.50 mill. and above….Rs.15,000
Upto Rs.200 mill.………...........Rs.30,000
Above Rs.200mill…………........Rs.60,000

In addition, Service Charges of Rs. 25,000 are also applicable

Products and Services
 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)
Company Services

 Customized services and state-of-the-art technology

infrastructure, have given us an edge over other exchanges in
the region.
 Fully automated trading, clearing and settlement system.
 Internet routed trading facility.
 Gateway trading (Order Management System).
 Investors and fund managers can also access information
through Display Only Terminal
 Internet trading facilities available.
 Order-driven system .
 Brokers connectivity to KSE through VPN (to ensure security of
data).
Data Services:

 TV channels also display KSE ticker through live feeds from

KSE system.
 Investors provided customized data packages for trading and
assessment of their portfolio on a real time basis.
 Data feed provided to major international redistributors
(Reuters, Bloomberg) on real time basis.
 KSE website offers data of market on real time basis,
including listed company profiles, snap shot of financials,
press releases and summary of market activities on real time
basis.
What is a Listed What is a Listed Security?
Company?
A Listed Security includes:
A Listed Company: • Shares (ordinary/preference)
• Whose shares have been • Debentures
listed on the exchange • Modaraba Certificate
• Term Finance Certificate
• Is in compliance with the laws • Scrips
and regulations of the Exchange • Participation Term Certificate
• Mushariqa Certificate
• Whose shares are available for • Bond
the General Public to purchase • Any other instrument that the
Federal Government may specify
for the purpose and which is
accepted for listing and is in
accordance with regulations of
the Exchange

Open-end-Mutual Funds
Close-end Mutual Fund
Modaraba
Leasing Companies
Inv. Banks / Inv. Cos. / Sec.
Cos
Commercial Banks
Insurance
Textile Spinning
Textile Weaving
Textile Composite
Woolen
Synthetics & Rayon
Jute
Sugar & Allied Industries
Cement Fertilizer
Tobacco Pharmaceutical
Refinery Chemical
Power Generation & Distribution Paper & Board
Vanaspati & Allied Industries
Oil & Gas Marketing Companies
Leather & Tanneries
Oil & Gas Exploration Companies Foods & Personal Care
Products
Engineering Glass & Ceramics
Automobile Assembler Miscellaneous
Automobile Parts & Accessories Bonds
Future Contracts
Cables & Electric Goods
Stock Index Future Contract
Transport
Technology & Communication
 Delisting

Stock exchange can delist companies for a number of

reasons including :-
• Merger with another company
• Solvency problems
• Name change company asked to be removed
• Failure to comply with exchange rules
 Benefits of listing

• Visibility
• Market support
• Investors confidence
• Increased demand for products and services
• Overall increase in profitability
 Future Plans of KSE

The following are in process:

• Demutualization of the Exchange – public ally listed with
strategic investor
• Promotion of Derivative Products

• New Services (Data Vending)

• Debt Market Trading Platform

• Investors education programs

(road shows, seminars &

online training)