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The Karachi Stock
Exchange
Empowering The
Companies of TomorrowBy Asad.Mazhar
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What is Stock Exchange?
A stock exchange, share market orbourse is a corporation or mutual
organization which provides facilities forstock brokers and traders, to tradecompany stocks and other security.
By Asad.Mazhar
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KSE Yesterday and Today
An Overview
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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
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KSE Today
Exchange owned by 200members
652 companies listed
4 indices
Modern Risk ManagementSystem
Var Based MarginPre Trade Margin Verification
KSE is FIX Compliant
Electronic Trading through KATS
Market capitalization*:US $ 54.28 billion
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Role and Functions of
a Stock Exchange
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Established for the purpose of assisting, regulating andcontrolling business of buying, selling and dealing insecurities.
Provides a market for the trading of securities to individualsand organizations seeking to invest their saving or excessfunds through the purchase of securities.
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Provides a physical location for buying and selling securitiesthat have been listed for trading on that exchange.
Establishes rules for fair trading practices and regulates thetrading activities of its members according to those rules.
The exchange itself does not buy or sell the securities, nordoes it set prices for them.
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Fair
The exchange assures that no investor will have an undueadvantage over other market participants.
Efficient marketThis means that orders are executed and transactions are settledin the fastest possible way.
Doing businessPeople 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 amutually agreeable price is found the trade is made
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Transparency
Investor make informed and intelligent decision about theparticular 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, corporateconditions and developments dividend, mergers and jointventures, and management changes etc.
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KSE has 4 Indices
KSE 100 Most widely reported Index
Representation of all Sectors of the Exchange
Consists of 100 companies representing 85% of totalmarket 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
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KMI - 30
Introduced in September 2008
KMI comprises of 30 Companies that quality the KMI Shariahscreening criteria and are weighted by float adjusted marketcapitalization.
12% cap on weights of individual securities.
Rebalancing of the Index will be done bi-annually.
Shariah Supervisory Board of Meezan Bank chaired by eminentShariah 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
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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
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Major Requirements of Listing include:
Minimum paid up capital of Rs. 200 million for a company seekinglisting
To succeed public offer of equity, it has to be subscribe by atleast 500 applications
Provisions of Listing Regulation 6-A relating to minimum freshpublic offering through prospectus as well as the minimumpublic offering requirements by way of Offer For Sale as laid
down under the Companies (Issue of Capital) Rule, 1996.
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The offering document has to be cleared by KSE before it issubmitted to the Securities & Exchange Commission ofPakistan for approval.
The company seeking listing is required to fulfill therelevant requirement of the Exchange under the ListingRegulations and the disclosures as required under theSecond Schedule of the Companies Ordinance 1984 &
Companies (Issue of Capital) Rules, 1996.
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Simple Admission and Listing Fee
Application made along with prescribed Documents and Fees toKSE;
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
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Products and Services
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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. Allsettlement occurs purely on cash basis. Depending on thecontract, settlement occurs 30, 60 & 90 days after the contractis purchased.
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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 thecontract is purchased.
Deliverable Futures:
Forward contracts to buy or sell a certain underlyinginstrument with actual delivery of the underlying instrument
occurring. Settlement occurs 30 days after the contract ispurchased.
- CFS (discontinued)- COT (discontinued)
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Company Services
Customized services and state-of-the-art technologyinfrastructure, have given us an edge over other exchangesin 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 informationthrough Display Only Terminal
Internet trading facilities available.
Order-driven system .
Brokers connectivity to KSE through VPN (to ensure securityof data).
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Data Services:
TV channels also display KSE ticker through live feeds fromKSE system.
Investors provided customized data packages for trading andassessment 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.
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Open-end-Mutual Funds
Close-end Mutual Fund
Modaraba
Leasing Companies
Inv. Banks / Inv. Cos. / Sec.
CosCommercial Banks
Insurance
Textile Spinning
Textile Weaving
Textile CompositeWoolen
Synthetics & Rayon
Jute
Sugar & Allied Industries
Cement
Tobacco
Refinery
Power Generation & Distribution
Oil & Gas Marketing Companies
Oil & Gas ExplorationCompanies
Engineering
Automobile Assembler
Automobile Parts & Accessories
Cables & Electric Goods
Transport
Technology & Communication
Fe
rtilizer
Pharmaceutical
Chemical
Paper & Board
Vanaspati & AlliedIndustries
Leather & Tanneries
Foods & Personal CareProducts
Glass & Ceramics
Miscellaneous
Bonds
Future Contracts
Stock Index FutureContract
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Delisting
Stock exchange can delist companies for a number ofreasons including :-
Merger with another company
Solvency problems
Name change company asked to be removed
Failure to comply with exchange rules
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The following arein process:
Demutualization ofthe Exchange public allylisted with
strategic investor
Promotion ofDerivativeProducts
New Services (Data Vending)
Debt Market Trading Platform
Investors education programs
(road shows, seminars &
online training)
Future Plans of KSE