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 ExchangesTwenty 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

EuropeFrankfurt Stock Exchange (Deutsche Börse)

937,452.9 264,970.3

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

EuropeMadrid Stock Exchange (Bolsas y Mercados Españoles)

871,061.4 114,994.0

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

• 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

KSE Tomorrow

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.

FairThe exchange assures that no investor will have an undue

advantage over other market participants.

Efficient marketThis means that orders are executed and transactions are settled

in 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 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 Company? A Listed Company:• Whose shares have been listed on the exchange • Is in compliance with the laws and regulations of the Exchange • Whose shares are available for the General Public to purchase

What is a Listed Security? A Listed Security includes:• Shares (ordinary/preference)• Debentures• Modaraba Certificate• Term Finance Certificate• Scrips• Participation Term Certificate• Mushariqa Certificate• Bond• 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

Tobacco

Refinery

Power Generation & Distribution

Oil & Gas Marketing Companies

Oil & Gas Exploration Companies

Engineering

Automobile Assembler

Automobile Parts & Accessories

Cables & Electric Goods

Transport

Technology & Communication

Fertilizer

Pharmaceutical

Chemical

Paper & Board

Vanaspati & Allied Industries

Leather & Tanneries

Foods & Personal Care Products

Glass & Ceramics

Miscellaneous

Bonds

Future Contracts

Stock Index Future 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

Benefits of listing

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

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)

Future Plans of KSE