The Karachi Stock

Exchange

“Empowering The
Companies of Tomorrow”
By Asad.Mazhar
What is Stock Exchange?

A stock exchange, share market or

bourse is a corporation or mutual
organization which provides facilities for
stock brokers and traders, to trade
company stocks and other security.
By Asad.Mazhar
KSE – Yesterday and Today
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
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.
 It is the biggest and most liquid exchange and has been
declared as the “Best Performing Stock Market of the
World for the year 2002”.
 It 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”.
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.
Open-end-Mutual Funds Sugar & Allied Industries Fertilizer

Close-end Mutual Fund Cement Pharmaceutical

Modaraba Tobacco Chemical

Leasing Companies Refinery Paper & Board

Power Generation & Distribution Vanaspati & Allied
Inv. Banks / Inv. Cos. / Sec.
Industries
Cos Oil & Gas Marketing Companies
Leather & Tanneries
Commercial Banks Oil & Gas Exploration
Companies Foods & Personal Care
Insurance
Products
Textile Spinning Engineering
Glass & Ceramics
Textile Weaving Automobile Assembler
Miscellaneous
Textile Composite Automobile Parts & Accessories
Bonds
Woolen Cables & Electric Goods
Future Contracts
Synthetics & Rayon Transport
Technology & Communication Stock Index Future
Jute Contract
 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
 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)