Report FI Karachi Stock Exchange

Karachi Stock Exchange
Karachi
Stock
Exchange
“Empowering The
Companies of Tomorrow”
Mohammad Ali Jinnah University 1
Financial
Institution
Section: B

Karachi
Stock
Exchange
By;

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)
TABLE OF CONTENTS
OVERVIEW..................................................................................................................5
INTRODUCTION.........................................................................................................6
HISTORY....................................................................................................................10
ROLES OF STOCK EXCHANGE..............................................................................13
Raising capital for businesses..............................................................................13
Mobilizing savings for investment.......................................................................13
Facilitating company growth...............................................................................13
Redistribution of wealth.......................................................................................13
Corporate governance..........................................................................................14
Creating investment opportunities for small investors........................................14
Government capital-raising for development projects.........................................14
Barometer of the economy...................................................................................15
MAJOR STOCK EXCHANGES.................................................................................17
KARACHI STOCK EXCHANGE..............................................................................18
MARKET INDICES....................................................................................................19
KSE 100 Index.........................................................................................................19
KSE 30 Index...........................................................................................................22

KMI-30....................................................................................................................29
PROGRESS REPORT.................................................................................................35
ROLE AND FUNCTIONS OF
A STOCK EXCHANGE ............................................................................................37
LISTING REQUIREMENTS......................................................................................38
Requirements by stock exchange.........................................................................39
Requirements by Karachi stock exchange...........................................................39
LISTED SECTORS.....................................................................................................41
PRODUCTS AND SERVICES...................................................................................42
THE FUTURE OF STOCK EXCHANGES................................................................44
FUTURE PLANS OF KSE..........................................................................................46
REFERENCES............................................................................................................47
OVERVIEW
This report will cover the information related to the Stock

Exchange and its overall functions and working procedure.
The main influence of this report is on Karachi Stock
Exchange, its procedure of working and its role that he
played in an economy and all the related aspects are also
a part of this report.

• 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
• Exchange owned by 200 members
• 652 companies listed
• 4 indices
• Modern Risk Management System
a. Var Based Margin
b. Pre Trade Margin Verification
• KSE is FIX Compliant
• Electronic Trading through KATS

• Market capitalization*: US $ 26.04 billion

• Publicly Listed Company with strategic investor
• Products to include:
a. Options
b. ETFs
c. Tradable Sector Indices
d. Debt Market Trading
• Broad based investor participation
• Cross border listings of companies
• Opening up of branches in other cities and in the
region
INTRODUCTION
Definition
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.
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 exchanges also provide
facilities for the issue and redemption of securities as well
as other financial instruments and capital events including
the payment of income and dividends. The securities
traded on a stock exchange include: shares issued by
companies, unit trusts, derivatives, pooled investment
products and bonds. To be able to trade a security on a
certain stock exchange, it has to be listed there. Usually
there is a central location at least for recordkeeping, but
trade is less and less linked to such a physical place, as
modern markets are electronic networks, which gives
them advantages of speed and cost of transactions. Trade
on an exchange is by members only. The initial offering of

stocks and bonds to investors is by definition done in the

primary market and subsequent trading is done in the
secondary market. A stock exchange is often the most
important component of a stock market. Supply and
demand in stock markets is driven by various factors
which, as in all free markets, affect the price of stocks
(see stock valuation).
There is usually no compulsion to issue stock via the stock

exchange itself, nor must stock be subsequently traded on
the exchange. Such trading is said to be off exchange or
over-the-counter. This is the usual way that derivatives
and bonds are traded. Increasingly, stock exchanges are
part of a global market for securities.
Vision
To be a leading financial institution, offering

efficient, fair and transparent securities
market in the region and enjoying full confidence
of the investors.
Mission
To strive and provide quality and value-added

services to the capital market in an
efficient, transparent and orderly manner,
compatible with international standards and
best practices;

To provide state of the art technology and

automated trading operations driven by
a team of professionals in accordance with good
corporate governance;
To protect and safeguard the interest of all its

stakeholders, i.e. members, listed
companies, employees and the investors at large;
and
To reflect country’s economic health and behaviour

and play its role for the growth,
development and prosperity of Pakistan.
KSE POSITIONED TO BE A HUB OF CAPITAL

FORMATION IN THE REGION
• South Asian Federation of Exchanges (SAFE)

• Vice Chairmanship of the South Asian Federation of
Exchanges Member Federation of Euro-Asian Exchanges
(FEAS)
• Affiliate Member of the World Federation of Exchanges
(WFE)
• Affiliate Member of International Organization of
Securities Commissions (IOSCO)
• Agreements with other Exchanges Dubai Financial
Markets Abu Dhabi Securities Market Shanghai Stock
Exchange

THE FUTURE SUCCESS WILL DEPEND ON THE

QUALITY OF HUMAN RESOURCES
• A spirit of youthful energy, high intellect and superior

skills characterizes our people.
• Our workforce consists of a combination of youth and
experience – perfectly suitable to the organization’s
current requirement and future challenges.
• KSE employs the best available human resource from the
capital market and financial industry.
• Candidates are selected based on their individual energy,
quick thinking ability, confidence, decision making ability,
integrity and professionalism – attributes that define the
person’s compatibility with KSE culture.
• The key to our long-term success is the creative genius
of our people and their drive towards excellence.
• Our employees are exposed to an organizational
commitment to continuous personal and professional
development.
• Our people get involved in various initiatives ranging
from management skills, development and personal
improvement, to technology advancement and process
enhancement.
• On a regular basis, some of our best performers are
selected for our Mentoring Program, where seasoned
mentors groom their portages towards positions of
greater responsibility and influence.
• Promoting a performance driven culture where ‘high
performers’ are recognized for their exceptional
contributions.
KSE PLAY A KEY ROLE IN PAKISTAN’S ECONOMY
• The KSE is one of Pakistan’s 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.

• Our investors pay 10% tax on dividends.
THIER CUSTOMER
• Issuers (Listed Companies)

• Brokers and Members
• Investors
THE TECHNOLOGY
The Information Technology Group forms the Core of the

Business Operations
• Development, implementation and monitoring of state-

of-the-art trading system known as Karachi Automated
Trading System (KATS), introduced in 2002 with a
capacity of 1 million trades a day and unlimited number
of users.
• Disaster Recovery Management and Business Continuity
Programs database backups.
• Software Development, Testing and Training.
• Customer Services Support.
• Caters to member’s complaints regarding computer
network and trading systems.
• Administration and Maintenance of servers and operating
systems.
• Partnerships with Microsoft, Oracle and Unisys for I.T.
infrastructure.
HISTORY
In 11th century France the courtiers de change was 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.
Some stories suggest that the origins of the term "bourse"

come from the Latin bursa meaning a bag because, in 13th
century Bruges, the sign of a purse (or perhaps three purses),
hung on the front of the house where merchants met.
However, it is more likely that 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". The idea spread quickly around Flanders and
neighboring counties and "Bourses" soon opened in Ghent and
Amsterdam.
In the middle of the 13th century, Venetian bankers began to

trade in government securities. In 1351, the Venetian
Government outlawed spreading rumors intended to lower the
price of government funds. There were people in Pisa, Verona,
Genoa and Florence who also began trading in government
securities during the 14th century. This was only possible
because these were independent city states ruled by a council
of influential citizens, not by a duke.
The Dutch later started joint stock companies, which let

shareholders invest in business ventures and get a share of
their profits—or losses. In 1602, the Dutch East India Company
issued the first shares on the Amsterdam Stock Exchange. It
was the first company to issue stocks and bonds. In 1688, the
trading of stocks began on a stock exchange in London.
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.

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”. As on May 30, 2008, 654 companies were listed with a
market capitalization of Rs. 3,746.203 billion (US$ 56.334
billion) having listed capital of Rs. 705.873 billion (US$ 10.615
billion). The KSE 100TM Index closed at 12130.51 on May 30,
2008.
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.

ROLES OF STOCK EXCHANGE

Stock exchanges have multiple roles in the economy, this may
include the following:
Raising capital for businesses
The Stock Exchange provide companies with the facility to

raise capital for expansion through selling shares to the
investing public.
Mobilizing savings for investment
When people draw their savings and invest in shares, it leads

to a more rational allocation of resources because funds, which
could have been consumed, or kept in idle deposits with
banks, are mobilized and redirected to promote business
activity with benefits for several economic sectors such as
agriculture, commerce and industry, resulting in stronger
economic growth and higher productivity levels and firms.
Facilitating company growth
Companies view acquisitions as an opportunity to expand

product lines, increase distribution channels, hedge against
volatility, increase its market share, or acquire other necessary
business assets. A takeover bid or a merger agreement
through the stock market is one of the simplest and most
common ways for a company to grow by acquisition or fusion.
Redistribution of wealth
Stock exchanges do not exist to redistribute wealth. However,

both casual and professional stock investors, through
dividends and stock price increases that may result in capital
gains, will share in the wealth of profitable businesses.

Corporate governance
By having a wide and varied scope of owners, companies

generally tend to improve on their management standards and
efficiency in order to satisfy the demands of these
shareholders and the more stringent rules for public
corporations imposed by public stock exchanges and the
government. Consequently, it is alleged that public companies
(companies that are owned by shareholders who are members
of the general public and trade shares on public exchanges)
tend to have better management records than privately-held
companies (those companies where shares are not publicly
traded, often owned by the company founders and/or their
families and heirs, or otherwise by a small group of investors).
However, some well-documented cases are known where it is
alleged that there has been considerable slippage in corporate
governance on the part of some public companies. The dot-
com bubble in the early 2000s, and the subprime mortgage
crisis in 2007-08, are classical examples of corporate
mismanagement. Companies like Pets.com (2000), Enron
Corporation (2001), One.Tel (2001), Sunbeam (2001), Web van
(2001), Adelphia (2002), MCI WorldCom (2002), Parmalat
(2003), American International Group (2008), Lehman Brothers
(2008), and Satyam Computer Services (2009) were among
the most widely scrutinized by the media.
Creating investment opportunities for small

investors
As opposed to other businesses that require huge capital

outlay, investing in shares is open to both the large and small
stock investors because a person buys the number of shares
they can afford. Therefore the Stock Exchange provides the
opportunity for small investors to own shares of the same
companies as large investors.
Government capital-raising for development

projects
Governments at various levels may decide to borrow money in

order to finance infrastructure projects such as sewage and
water treatment works or housing estates by selling another

category of securities known as bonds. These bonds can be

raised through the Stock Exchange whereby members of the
public buy them, thus loaning money to the government. The
issuance of such bonds can obviate the need to directly tax
the citizens in order to finance development, although by
securing such bonds with the full faith and credit of the
government instead of with collateral, the result is that the
government must tax the citizens or otherwise raise additional
funds to make any regular coupon payments and refund the
principal when the bonds mature.
Barometer of the economy
At the stock exchange, share prices rise and fall depending, largely, on market
forces. Share prices tend to rise or remain stable when companies and the
economy in general show signs of stability and growth. An economic
recession, depression, or financial crisis could eventually lead to a stock
market crash. Therefore the movement of share prices and in general of the
stock indexes can be an indicator of the general trend in the economy.


MAJOR STOCK
EXCHANGES
Twenty Major Stock Exchanges in the World: Market
Capitalization & Year-to-date Turnover at the end of
Market Value Total Share Turnover
Region Stock Exchange
(millions USD) (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
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 Börse) 937,452.9 264,970.3
Europe London Stock Exchange 1,758,157.7 241,151.1
Madrid Stock Exchange (Bolsas y Mercados
Europe 871,061.4 114,994.0
Españoles)
Europe Milan Stock Exchange (Borsa Italiana) 456,206.7 48,094.8
Europe Nordic Stock Exchange Group OMX1 503,725.8 55,299.9
Europe Swiss Exchange 761,896.1 63,435.6
January 2009

KARACHI STOCK
EXCHANGE
The biggest Stock exchange of Pakistan located in Karachi is
the Karachi Stock Exchange. Due to the liquidity offered by the
Karachi Stock Exchange, it is known as stated as the “Best
Performing Stock Market of the World for the year 2002”.
Evolution of the Karachi Stock Exchange
By 2007, the number of listed companies reached 754 by the

year 2007. The market capitalization at the same time was US
$52 billion whereas the listed capital was US $8.27 billion.
Following the estimates of the State bank Of Pakistan, we see
that the foreign investments in the capital market are as large
as US $ 523 million.
Arbitration
The disputes that arise between members and the investors in

the Karachi Stock Exchange are resolved through the advices
of the Arbitration Committee of the Exchange.
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.
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.
MARKET INDICES
KSE 100 Index
The KSE 100TM Index was introduced in 1991 and comprises
of 100 companies selected on the basis of sector
representation and highest market capitalization, which
captures over 80% of the total market capitalization of the
companies listed on the Exchange. Out of 35 Sectors, 34
companies are selected i.e., one company from each Sector
(excluding Open-End Mutual Fund) on the basis of the large
market capitalization and the remaining 66 companies are
selected on the basis of highest market capitalization. This is a
total return index i.e. dividend, bonus and rights are adjusted.
The same methodology is applicable in the case of All Share
Index, which includes all the listed companies, (except Open-
End Mutual Funds).
• Most recognized index of the KSE

• Representation from all sectors of the KSE and
includes the largest companies on the basis of their
market capitalization
• Represents over 85% of the market capitalization of
the Exchange.
1. OBJECTIVE
The primary objective of the KSE100 index is to have a

benchmark by which the stock price performance can be
compared to over a period of time. In particular, the KSE 100 is
designed to provide investors with a sense of how the Pakistan

equity market is performing. Thus, the KSE100 is similar to

other indicators that track various sectors of the Pakistan
economic activity such as the gross national product,
consumer price index, etc.
2. BRIEF ABOUT KSE-100 INDEX
The KSE-100 Index was intorduced in November 1999 with

base value of 1,000 points. The Index comprises of 100
companies selected on the basis of sector representation and
highest market capitalisation, which captures over 80% of the
total market capitalisation of the companies listed on the
Exchange. Out of the following 35 Sectors, 34 companies are
selected i.e. one company from each sector (excluding Open-
End Mutual Fund Sector) on the basis of the largest market
capitalisation and the remaining 66 companies are selected on
the basis of largest market capitalisation in descending order.
This is a total return index i.e. dividend, bonus and rights are
adjusted.
LIST OF SECTORS
1 Open-end Mutual Funds 19 Oil & Gas Marketing Companies
2 Close-end Mutual Funds 20 Oil & Gas Exploration Companies
3 Modarabas 21 Engineering
4 Leasing Companies 22 Automobile Assembler
5 Investment Banks/Inv. Cos./Securities Cos. 23 Automobile
Parts & Accessories
6 Commercial Banks 24 Cables & Electric Goods
7 Insurance 25 Transport
8 Textile Spinning 26 Technology & Communication
9 Textile Weaving 27 Fertilizer
10 Textile Composite 28 Pharmaceuticals
11 Woollen 29 Chemical
12 Synthetic & Rayon 30 Paper & Board
13 Jute 31 Vanaspati & Allied Industries

14 Sugar & Allied Industries 32 Leather & Tanneries

15 Cement 33 Food & Personal Care Products
16 Tobacco 34 Glass & Ceramics
17 Refinery 35 Miscellaneous
18 Power Generation & Distribution
3. STOCK SELECTION RULES
The selection criteria for stock inclusion in the recomposed

KSE100 Index are:
Rule # 1 Largest market capitalisation in each of the 34

Karachi Stock Exchange sectors excluding Open-end Mutual
Fund Sector;
Rule # 2 The remaining index places (in this case 66) are
taken up by the largest market capitalisation companies in
descending order.
Rule # 3 Company which is on the Defaulters’ Counter and/or

its trading is suspended, declare Non-Tradable (i.e. NT) in
preceeding 6 months from the date of recomposition shall not
be considered in the recomposition of KSE-100 Index.
A number of the 34 top sector companies may also qualify for

inclusion on the basis of their market capitalisation. In other
words, companies may qualify solely under rule 1, solely under
rule 2, or under both.
The fact that the sector rule is identified as Rule 1 does not
imply that it is more important, only that the nature of the
selection process is such that it is the screening that is done
first.
4. CALCULATION METHODOLOGY
In the simplest form, the KSE100 index is a basket of price and

the number of shares outstanding. he value of the basket is
regularly compared to a starting point or a base period. In our

case, the ase period is 1st November, 1991. To make the

computation simple, the total market value of the ase period
has been adjusted to 1000 points.
Thus, the total market value of the base period has een
assigned a value of 1000 points. n example of how the KSE100
Index is calculated can be demonstrated by using a three-
stock ample. Table 1 illustrates the process. First, a starting
point is selected and the initial value of the hree-stock index
set equal to 1000.
Taking stock A’s share price of Rs. 20 and multiplying it by its

total common shares outstanding of 50 million in the base
period provides a market value of one billion Rupees. This
calculation is repeated for stocks B and C with the resulting
market values of three and six billion Rupees, respectively.
The three market values are added up, or aggregated, and set
equal to 1000 to form the base period value. All future market
values will be compared to base period market value in
indexed form.
KSE 30 Index
The primary objective of the KSE-30 Index is to have a
benchmark by which the stock price performance can be
compared to over a period of time. In particular, the KSE-30
Index is designed to provide investors with a sense of how
large company’s scrips of the Pakistan’s equity market are
performing. Thus, the KSE-30 Index will be similar to other
indicators that track various sectors of country’s economic
activity such as the gross national product, consumer price
index, etc.
Globally, the Free-float Methodology of index construction is

considered to be an industry best practice and all major index
providers like MSCI, FTSE, S&P, STOXX and SENSEX have
adopted the same. MSCI, a leading global index provider,
shifted all its indices to the Free-float Methodology in 2002.

KSE-30 Index is calculated using the “Free-Float Market

Capitalization” methodology. In accordance with methodology,
the level of index at any point of time, reflects the free-float
market value of 30 companies in relation to the base period.
The free-float methodology refers to an index construction
methodology that takes into account only the market
capitalization of freefloat shares of a company for the purpose
of index calculation.
Free-float Methodology improves index flexibility in terms of

inclusion any stock from all the listed stocks. This improves
market coverage and sector coverage of the index. For
example, under a Full-Market Capitalization Methodology,
companies with large market capitalization and low free-float
can be included in the Index. However, under the Free-float
Methodology, since only the free-float market capitalization of
each company is considered for index calculation, it becomes
difficult to include closely held companies in the index while at
the same time preventing their undue influence on the index
movement.
• Introduced in 2006
• Based on the “Free Float Methodology”
• Includes only the top 30 most liquid companies
listed on the KSE.
FREE - FLOAT METHODOLOGY
Free-Float means proportion of total shares issued by a

company that are readily available for trading at the Stock
Exchange. It generally excludes the shares held by controlling
directors / sponsors / promoters, government and other
locked-in shares not available for trading in the normal course.
1. Objective and Description:

• Free-Float calculation can be used to construct stock indices
for better market representation than those constructed on the
basis of total market capitalization of companies.

• It gives weight for constituent companies as per their actual

liquidity in the market and is not unduly influenced by tightly
held large-cap companies.
• Free-Float can be used by the Exchange for regulatory

purposes such as risk management and market surveillance.
2. Free-Float Calculation Methodology:

Total Outstanding Shares XXX
Less: Shares held by Directors/sponsors XXX
Government Holdings as promoter/acquirer/
controller XXX
Shares held by Associated Companies
(Cross holdings) XXX
Shares held with general public in
Physical Form XXX XXX
_______
Free-Float: XXX
_______
Notwithstanding to the above calculations, under no
circumstances, free-float of a scrip shall exceed its book entry
shares, available in the Central Depository System.
Share holdings held by investors that would not, in the normal

course come into the market for trading shall be treated as
“Controlling / Strategic Holdings” and shall not be included in
the Free-Float. In pecific, the following categories shall be
excluded in determination of Free-Float:
• Holdings by promoters / directors / acquirers which has

control element
• Holdings by persons / bodies with "Controlling Interest"
• Government holding as promoter / acquirer
• Equity held by associated/group companies (cross-holdings)

• Shares that could not be sold in the open market, in normal

course.
3. Determining Free-Float Factor:

The listed companies shall submit their pattern of
shareholding, in the prescribed manner, to the Exchange. The
Exchange will determine the Free-Float Factor for each such
company. Free-Float Factor is a multiple with which the total
market capitalization of a company is adjusted to arrive at the
Free-Float market capitalization. Once the Free-Float of a
company is determined, it is rounded-off to the higher
multiple of 5 and each company is categorized into one of the
20 bands given below.
4. Free-Float Bands:
% Free-Float Free-Float Factor

>0 – 5% 0.05
>5 – 10% 0.10
>10 – 15% 0.15
>15 – 20% 0.20
>20 – 25% 0.25
>25 – 30% 0.30
>30 – 35% 0.35

>35 – 40% 0.40

>40 – 45% 0.45
>45 – 50% 0.50
>50 – 55% 0.55
>55 – 60% 0.60
>60 – 65% 0.65
>65 – 70% 0.70
>70 – 75% 0.75
>75 – 80% 0.80
>80 – 85% 0.85
>85 – 90% 0.90
>90 – 95% 0.95
>95 – 100% 1.00
PRE - REQUISITES TO QUALIFY FOR INCLUSION IN

KSE-30 INDEX
1 The Company which is on the Defaulters’ Counter and/or its
trading is suspended, declared Non-Tradable (i.e. NT) in
preceding 6 months from the date of recomposition shall not
be considered for inclusion in KSE-30 Index;
2 The Company will be eligible for KSE-30 Index if its securities

are available in the Central Depository System;
3 The Company should have a formal listing history of at least

two months on KSE;

4 The company must have an operational track record of at

least one financial year and it should not be in default(s) of the
Listing Regulations;
5 The Company should have minimum free-float shares of 5%

of total outstanding shares;
6 The Company will be eligible for KSE-30 Index if its securities

are traded for 75% of the total trading days;
7 The Open-End and Closed-End Mutual Funds will not be

eligible for inclusion in the KSE-30 Index;
SELECTION CRITERIA
The companies which qualify the prerequisites will be selected
on the basis of highest marks obtained as per the following
criteria:
1 Free-Float Market Capitalization
The scrip should include in the Top Companies, ranked on the

basis of free-float market capitalization.
The free-float market capitalization for each company is

calculated by multiplying its total outstanding free-float shares
with the closing market price on the day of composition / re-
composition.
2 Liquidity
The scrip included in the top companies should also be

characterized by adequate liquidity i.e. transaction cost and
one of the practical, realistic and accurate measures of market
liquidity is Impact Cost. It is defined as the cost of executing a
transaction in a given stock for a specific predefined order size
of fixed rupee amount (currently set to Rs. 500,000). The
transaction cost referred here is not the fixed cost typically
incurred in terms of transaction charges or cost arising
through CDC, rather it is the cost attributable to the market

liquidity, which comes from buyers and sellers in the market.

Average of the best bid price and the best offer price of a scrip
at any time, called ideal price, is considered as the best price
to trade in that particular scrip at that time. However, every
buyer/seller suffers a cost in excess of this ideal price while
actually executing a transaction (buy or sell). This price
movement from the ideal price is known as the transaction
cost and when measured as the percentage of ideal price is
called Impact Cost.
Under impact cost analysis high liquidity is represented by low

impact cost. A stock with high market capitalization cannot be
assumed to be liquid just because of its sheer size. Some large
market capitalization stocks are in reality very illiquid.
Similarly, high trading volumes, in themselves, are not enough
to confirm consistent liquidity of a stock.
Impact cost analysis looks at the order book of each stock

throughout the whole trading day and based on the bids and
offers calculates impact costs in terms of percentages for each
instance of the order book.
The Impact Cost of each security is calculated as described

hereunder:
• First the impact cost is calculated separately for the buy and
the sell side in each order book for past six months.
• The buy side impact cost (or the sell side impact cost) is the
simple average of the buy side impact cost (or the sell side
impact cost) computed in the last six months.
• Impact Cost reckoned for the purpose of all computation is

the mean of such buy side impact cost and sell side impact
cost.
3 Final Rank
The scrip should include in Top 30 companies on the basis of

final ranking. The final rank is arrived by assigning 50%

weightage on the basis of free-float market capitalization and

50% weightage to the liquidity based on Impact Cost of the
securities. The security having highest free-float market
capitalization and lowest Impact cost is assigned full marks
and the marks for rest of the securities are calculated
proportionately.
4 Selection of 30 companies for inclusion in the

KSE-30 Index
The companies selected for inclusion in the KSE-30 Index are

determined on the basis of "Free-Float Market Capitalization"
methodology. As per this methodology, the level of Index at
any point of time reflects the free-float market value of 30
component stocks relative to a base period. The market
capitalization of a company is determined by multiplying the
price of its stock by the number of free float shares
determined for the purpose.
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.
Currently, the three indices being maintained at the Karachi

Stock Exchange are KSE-100 Index, KSE All-Share Index, and
KSE-30 Index. The KSE-100 and KSE All Share Indices are
market capitalization indices while KSE-30 Index is based on
free-float capitalization.
The free-float methodology of index construction is considered

as the best practice by all major index providers including
MSCI, FTSE, S&P, STOXX, and SENSEX, because it results in a
performance measurement of stocks that are readily
accessible and well traded.
KSE-Meezan Index is also calculated using the “Free-Float

Market Capitalization”, wherein, the level of index at any point
in time reflects the free-float market value of the selected
Shariah compliant shares in relation to the base period. The
free-float methodology refers to an index construction
methodology that takes into account only the market
capitalization of free-float shares of a company for the
purposes of index calculation. The free-float capitalization of
the Islamic index constituents shall be capped in relation to
the overall capitalization of Islamic index at 12% on the first
day of composition. At all subsequent re-compositions dates,
any constituent breaching this limit will thus be brought in line
with this requirement. Any surplus free-float capitalization will
be distributed to the remaining companies according to their
relative capitalization in the index.
1 Free Float Methodology
Free-Float of a security is defined as the proportion of total

shares outstanding that are deemed available for purchase in
the Stock Exchange. Therefore, it generally excludes the
shares held by controlling directors / sponsors / promoters,

government and other locked-in shares not available for

trading in the normal course.
Free-Float methodology reflect the true image of liquidity

present in the market, hence the index movement is unbiased
towards the closely held companies, High net-worth
individuals, speculators, and hedgers, may use the free float
number for framing trading strategies, while regulatory bodies
may use these numbers for effective risk management and
market surveillance to minimize market manipulation
incidences.
1.1 Free Float Calculation
Total Outstanding Shares XXX

Less: Shares held by Directors/sponsors XXX
Government Holdings as promoter/acquirer/controller XXX
Shares held by Associated Companies (Cross holdings) XXX
Shares held with public in Physical Form XXX
XXX
____
Free-Float:
XXX
____
Notwithstanding to the above calculations, under no

circumstances whatsoever, free-float of a scrip shall exceed
its book entry shares, available in the Central Depository
System. Share held by investors that would not, under usual
circumstances, be available in the market for trading shall be
treated as “Controlling / Strategic Holdings” and shall under no
circumstances whatsoever, be included in the Free-Float.
Shares held by promoters, directors, acquirers for the purpose
of maintaining control, whether or not related to Government,
or held by associated groups in terms of cross-holding or any
shares which precisely cannot be sold in the open market shall
preclude such numbers while determining the free-float.
1.2 Determining the Free Float

Listed companies shall submit their pattern of shareholding in

the prescribed manner to help the Exchange determine a
Free-Float Factor. Free-Float Factor is a multiple with which the
total market capitalization of a company is adjusted to arrive
at its Free-Float market capitalization. The screened list of
Shariah compliant securities will be provided by Al Meezan
Investment Management Limited to provide its Shariah
screening services. Once the equity is approved by Shariah
Board and is included in the horizon for Islamic Index, its free-
float is rounded-off to the higher multiple of five and each
company is categorized into one of the 20 bands.
2 Eligibility Criteria
2.1 Screening Filters

The companies whose primary business is related to any of the
following areas or Business Segments shall not be eligible for
inclusion in the Islamic Index.
• Conventional Banks and other Financial Institutions that
are engaged in interest related activities.
• Enterprises having gambling or Alcohol as a part of their
concern.
• Cable Networks, entertainment channels, advertising and
media with exception to the concerns engaged in the
business of news dissemination.
• Arms Manufacturing
• Conventional Insurance both Life and General
• Concerns involved in producing or financing concerns,
which produce Non-Halal Food or perform any activity
relating to packaging and processing of such foods items.

• Determination of financial ratios after its discussion with

the Sharia-board
• The Company which is on the Defaulters’ Counter and/or
its trading is suspended, declared Non-Tradable (i.e. NT)
in preceding 6 months from the date of re-composition
shall not be consideredfor inclusion in KMI-30 Index;
• The Company will be eligible for KMI-30 Index if its
securities are available in the CentralDepository System;
• The Company should have a formal listing history of at
least two months on KSE;
• The company must have an operational track record of at
least one financial year and it shouldnot be in default(s)
of the Listing Regulations;
• The Company should have minimum free-float shares of
5% of total outstanding shares;
• The Company will be eligible for KMI-30 Index if its
securities are traded for 75% of the total trading days;
• Mutual Funds (both Open-Ended and Closed-Ended) are
ineligible for inclusion in the KMI-30
2.2 Screening - Financial Ratios and International

Best Practice
The companies are examined for compliance in financial ratios,

as certain ratios may violate compliance measurements. Al
Meezan observes leverage, investments, illiquid assets, and
revenue as key areas in the following manner from the
prospect of non-compliant activities. All of these are subject to
evaluation on an ongoing basis.
2.2.1 Leverage Compliance

Compliance is measured as Interest bearing debt / Total Assets

< 40 %;
2.2.2 Investment Compliance

Compliance is measured as non-compliant investment / Total
Assets < 33%
2.2.3 Income Compliance

Companies with Revenues from non-compliant activities are
eligible only if they comply with the following threshold: Non-
compliant Income / Total Revenue < 5%
2.2.4 Illiquid Assets Compliance

Compliance is measured as Illiquid Assets / Total Assets > 20%
2.2.5 Net Liquid Assets Compliance

Market Price per share should be greater than Net Liquid
Assets per share
3 Selection Criteria
All the eligible companies for the Islamic Index can be included
up to a maximum of thirty (30) companies. During the
selection process, each company’s financial reports are
thoroughly reviewed by research analysts of Al Meezan to
ensure that the company meets benchmarks or thresholds for
Shariah compliance screening. Those that are found to be non-
compliant are screened out. The industries that are considered
non-compliant (as defined in the eligibility criteria) are not
considered for inclusion in the Islamic, as these would not be
appropriate for investment from Shariah perspective. From
the list of Shariah compliant companies, securities are selected
on the basis of free float and Impact Cost. While ranking the
companies 50% weight is assigned to free float capitalization
and the remaining 50% is allocated to Impact Cost such that
the companies with the highest free float and the lowest
Impact Cost get the highest rank in the selection process. Top

30 ranked companies as per above criteria are included in

Islamic Index.
PROGRESS REPORT
In million except companies, index and bonds
data
5 YEARS PROGRESS 2005-2009

Upto Upto Upto Upto Upto
30-12- 29-12- 31-12- 31-12- 07-04-
2005 2006 2007 2008 2009
Total No. of Listed
661 652 654 653 652
Companies
Total Listed Capital - 470,427.4 519,270.1 671,255.8 750,477.5 773,070.0
Rs. 7 7 2 5 8
Total Market 2,746,558. 2,771,113. 4,329,909. 1,858,698. 2,300,750.
Capitalisation - Rs. 97 94 79 90 23
KSE-100TM Index 9556.61 10040.50 14075.83 5865.01 7635.88
KSE-30 TM
Index 12521.54 16717.10 5485.33 8279.35

KSE All Share Index 6444.64 6770.06 9956.76 4400.76 5509.85

New Companies
19 9 14 10 2
Listed during the year
Listed Capital of New
30,090.28 14,789.76 57,239.92 15,312.12 1,541.38
Companies - Rs.
New Debt
Instruments Listed 8 3 3 7 -
during the year
Listed Capital of New
Debt Instruments - 10,900.00 3,400.00 6,500.00 26,500.00 -
Rs.
Average Daily
Turnover - Shares in 365.64 260.69 268.23 146.55 187.75
million
Average value of
33,583.29 31,610.71 25,262.97 14,228.35 5,315.36
daily turnover - Rs.
Average Daily
Turnover (FutureTM) 117.16 82.68 61.69 30.76 0.02
YTD
Average Value of
15,461.42 13,587.63 9,077.61 5,229.97 1.90
Daily Turnover - YTD
Foreign Investment in Securities Market
Inflow - Rs - - - - -
Outflow - Rs - - - - -
Net Inflow/(Outflow) -
- - - - -
Rs
YTD = Year to date

a. The KSE-100TM Index was introduced in November, 1991 and was
recomposed in November 1994.
b. The KSE-All Share Index was introduced in September, 1995.
c. Listed companies reflected in the relevant year have been stated

after 5 companies delisted in year 2000, 12 companies in 2001 and
24 companies in 2002, 8 in 2003, 44 in 2004, 15 in 2005 and 1 in
2006 (total 109) and merger of 1 company in 2000, 7 companies in
2001, 16 companies in 2002, 8 in 2003, 12 in 2004, 4 in 2005 and
12 in 2006 (total 61) and addition of 1 companies by splitting/
bifurcation in year 2001. In year 2004 preference shares of Chenab
Limited was listed and company offered ordinary shares in year
2005.

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 makes 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.
LISTING REQUIREMENTS
Listing requirements are the set of conditions imposed by a
given stock exchange upon companies that want to be listed
on that exchange. Such conditions sometimes include
minimum number of shares outstanding, minimum market
capitalization, and minimum annual income.

Requirements by stock exchange
Companies have to meet the requirements of the exchange in

order to have their stocks and shares listed and traded there,
but requirements vary by stock exchange:
• Bombay Stock Exchange: Bombay Stock Exchange

(BSE) has requirements for a minimum market
capitalization of Rs.250 Million and minimum public float
equivalent to Rs.100 Million.
• London Stock Exchange: The main market of the
London Stock Exchange has requirements for a minimum
market capitalization (£700,000), three years of audited
financial statements, minimum public float (25 per cent)
and sufficient working capital for at least 12 months from
the date of listing.
• NASDAQ Stock Exchange: To be listed on the NASDAQ
a company must have issued at least 1.25 million shares
of stock worth at least $70 million and must have earned
more than $11 million over the last three years.
• New York Stock Exchange: To be listed on the New
York Stock Exchange (NYSE) a company must have
issued at least a million shares of stock worth $100
million and must have earned more than $10 million over
the last three years.
Requirements by Karachi stock exchange

• 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

LISTED SECTORS
OPEN-END-MUTUAL FUNDS 0
CLOSED-END-MUTUAL FUNDS 23
MODARABAS 34
LEASING COMPANIES 18
INVESTMENT BANKS/COS./SECURITIES 31
COMMERCIAL BANKS 27
INSURANCE 39
TEXTILE SPINNING 107
TEXTILE WEAVING 18
TEXTILE COMPOSITE 36
WOOLEN 06
SYNTHETIC and RAYON 19
JUTE 06
SUGAR and ALLIED INDUSTRIES 41
CEMENT 24
TOBACCO 04
REFINERY 04
POWER GENERATION and DISTRIBUTION 13
OIL and GAS MARKETING COMPANIES 08
OIL and GAS EXPLORATION COMPANIES 05
ENGINEERING 13
AUTOMOBILE ASSEMBLER 14
AUTOMOBILE PARTS and ACCESSORIES 13
CABLE and ELECTRICAL GOODS 10
TRANSPORT 08
TECHNOLOGY and COMMUNICATION 11
FERTILIZER 06
PHARMACEUTICALS 09
CHEMICALS 26
PAPER and BOARD 10
VANASPATI and ALLIED INDUSTRIES 10
LEATHER and TANNERIES 06
FOOD and PERSONAL CARE-PRUDUCTS 24
GLASS and CERAMICS 12
MISCELLANEOUS 26
BONDS 38
FUTURE CONTRACTS 46
STOCK INDEX FUTURE CONTRACTS 105
Total 869

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.
FINANCIAL INFORMATION EXCHANGE (FIX)
Financial Information Exchange Protocol has been adopted by

the KSE for both trading and market data. Powered by FIX
based technology, the KSE will be able to attract local, regional
and global liquidity by providing KSE members to seamlessly
interact with their automated trading platform and offer
market access to their international trading partners.

THE FUTURE OF STOCK

EXCHANGES
The future of stock trading appears to be electronic, as
competition is continually growing between the remaining
traditional New York Stock Exchange specialist system against
the relatively new, all Electronic Communications Networks, or
ECNs. ECNs point to their speedy execution of large block
trades, while specialist system proponents cite the role of
specialists in maintaining orderly markets, especially under
extraordinary conditions or for special types of orders.
The ECNs contend that an array of special interests profit at

the expense of investors in even the most mundane exchange-
directed trades. Machine-based systems, they argue, are much
more efficient, because they speed up the execution
mechanism and eliminate the need to deal with an
intermediary.
Historically, the 'market' (which, as noted, encompasses the

totality of stock trading on all exchanges) has been slow to
respond to technological innovation, thus allowing growing
pure speculation to continue. Conversion to all-electronic
trading could erode/eliminate the trading profits of floor
specialists and the NYSE's "upstairs traders", who, like in
September and October 2008, earned billions of dollars selling
shares they did not have, and days later buying the same
amount of shares, but maybe 15 % cheaper, so these shares
could be handed to their buyers, thereby making the market
fall deeply.[citation needed]
William Lupien, founder of the Instinet trading system and the

OptiMark system, has been quoted as saying "I'd definitely say
the ECNs are winning... Things happen awfully fast once you
reach the tipping point. We're now at the tipping point."
One example of improved efficiency of ECNs is the prevention

of front running, by which manual Wall Street traders use
knowledge of a customer's incoming order to place their own

orders so as to benefit from the perceived change to market

direction that the introduction of a large order will cause. By
executing large trades at lightning speed without manual
intervention, ECNs make impossible this illegal practice, for
which several NYSE floor brokers were investigated and
severely fined in recent years.[6] Under the specialist system,
when the market sees a large trade in a name, other buyers
are immediately able to look to see how big the trader is in the
name, and make inferences about why s/he is selling or
buying. All traders who are quick enough are able to use that
information to anticipate price movements.
ECNs have changed ordinary stock transaction processing (like

brokerage services before them) into a commodity-type
business. ECNs could regulate the fairness of initial public
offerings (IPOs), oversee Hambrecht's OpenIPO process, or
measure the effectiveness of securities research and use
transaction fees to subsidize small- and mid-cap research
efforts.
Some[who?], however, believe the answer will be some

combination of the best of technology and "upstairs trading" —
in other words, a hybrid model.
Trading 25,000 shares of General Electric stock (recent[when?]

quote: $7.54; recent[when?] volume: 216,266,000) would be a
relatively simple e-commerce transaction; trading 100 shares
of Berkshire Hathaway Class A stock (recent quote:
$72,625.00; recent volume: 877) may never be. The choice of
system should be clear (but always that of the trader), based
on the characteristics of the security to be traded.
Even with ECNs forming an important part of a national market

system, opportunities presumably remain to profit from the
spread between the bid and offer price. That is especially true
for investment managers that direct huge trading volume, and
own a stake in an ECN or specialist firm. For example, in its
individual stock-brokerage accounts, "Fidelity Investments
runs 29% of its undesignated orders in NYSE-listed stocks, and
37% of its undesignated market orders through the Boston
Stock Exchange, where an affiliate controls a specialist post."

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)

REFERENCES
o http://www.kse.com.pk/
o http://www.kse.com.pk/
o http://en.wikipedia.org/wiki/Karachi_Stock_Exchange
o http://www.advfn.com/StockExchanges/about/KSE/Ka
rachiStockExchange.html
o http://www.economywatch.com/stockexchanges/kara
chi.html
o http://karachistockmarket.blogsome.com/
o http://thecurrentaffairs.com/index.php/bull-run-
continues-at-karachi-stock-exchange/

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Karachi Stock Exchange

Mohammad Ali Jinnah University 2

Mohammad Ali Jinnah University 3

Syed Owais Ali (SP07-

M. Moez Siddiqui (SP07-

Vinod Kumar (Sp07-

Mohammad Ali Jinnah University 4

This report will cover the information related to the Stock

Karachi Stock Exchange

Mohammad Ali Jinnah University 5

• Market capitalization*: US $ 26.04 billion

A stock exchange, (formerly a securities exchange) is

Mohammad Ali Jinnah University 6

stocks and bonds to investors is by definition done in the

There is usually no compulsion to issue stock via the stock

To be a leading financial institution, offering

To strive and provide quality and value-added

Mohammad Ali Jinnah University 7

To provide state of the art technology and

To protect and safeguard the interest of all its

To reflect country’s economic health and behaviour

KSE POSITIONED TO BE A HUB OF CAPITAL

• South Asian Federation of Exchanges (SAFE)

Mohammad Ali Jinnah University 8

THE FUTURE SUCCESS WILL DEPEND ON THE

• A spirit of youthful energy, high intellect and superior

KSE PLAY A KEY ROLE IN PAKISTAN’S ECONOMY

• The KSE is one of Pakistan’s largest tax payer and in the

Mohammad Ali Jinnah University 9

• Our investors pay 10% tax on dividends.

• Issuers (Listed Companies)

The Information Technology Group forms the Core of the

• Development, implementation and monitoring of state-

Mohammad Ali Jinnah University 10

communities on behalf of the banks. As these men also traded

Some stories suggest that the origins of the term "bourse"

However, it is more likely that in the late 13th century

In the middle of the 13th century, Venetian bankers began to

The Dutch later started joint stock companies, which let

On May 17, 1792, twenty-four supply brokers signed the

Mohammad Ali Jinnah University 11

Karachi Stock Exchange was incorporated on March 10, 1949;

Mohammad Ali Jinnah University 12

ROLES OF STOCK EXCHANGE

Raising capital for businesses

The Stock Exchange provide companies with the facility to

Mobilizing savings for investment

When people draw their savings and invest in shares, it leads

Facilitating company growth

Companies view acquisitions as an opportunity to expand

Stock exchanges do not exist to redistribute wealth. However,

Mohammad Ali Jinnah University 13

By having a wide and varied scope of owners, companies

Creating investment opportunities for small

As opposed to other businesses that require huge capital

Government capital-raising for development

Governments at various levels may decide to borrow money in

Mohammad Ali Jinnah University 14

category of securities known as bonds. These bonds can be

Barometer of the economy

Mohammad Ali Jinnah University 15

Mohammad Ali Jinnah University 16

Mohammad Ali Jinnah University 17