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2009

Stock Exchange
Its operations & functions
This document include a detail about the stock exchange its functions and operations, including the major stock exchange of the world and Pakistan

Rabia Muzaffar Ali


BEIT II !"!#"#$$%

Stock Exchange

Contents 1. Over view of market


. pg.03 Types of financial market Money market pg.04 Capital market pg.04 Market infra structure Stock exchange... pg.05 ntro!uction.. pg.0" #istory.. pg.0" $ecurities.. pg.0% Types of operation pg.0& Tra!ing process in $.'.. pg.09 (ole of $.' pg.10 )isting of securities in $.' pg.12 *+ners,ip of $.'.. pg.14 -uture of $.'. pg.14 *t,er types of $.'. pg.15 Functions of stock exchange. pg.1" pg.21

2.

3. 4. World major S.E.. 5. Stock exchange of Pakistan..


pg.23 .arac,i stock e/c,ange 0..$.'1. pg.24 )a,ore stock e/c,ange 0).$.'1 pg.30 slama2a! stock e/c,ange 0 .$.'1 pg.32

Stock Exchange

1. Over view of market


Market

nfra structure

-inancial market

Money market

Capital market

$ecurity market

3on security market

$tock e/c,anges

Clearing 4 settlement

'!ucation 4 training

n5estor pro!uctor

(ating agency

Stock Exchange

Over view of market 1.


arket!"
6 pu2lic place +,ere 2uyers an! sellers make transactions7 !irectly or 5ia interme!iaries. 6lso sometimes means t,e stock market. 6 market is a pu2lic place +,ere pro5ision an! o28ect are e/pose! for sale.

#. $%&es of
Money Market Capital Market one%

arket!"
T,ere are t+o types of Market as follo+ing 9

arket!"

n finance7 t,e money market is t,e glo2al financial market for s,ort-term 2orro+ing an! len!ing. t pro5i!es s,ort-term li:ui!ity fun!ing for t,e glo2al financial system. T,e money market is +,ere s,ort-term o2ligations suc, as Treasury 2ills7 commercial paper an! 2ankers; acceptances are 2oug,t an! sol!. Ca&ital arket!"

t is !efine! as a market in +,ic, money is pro5i!e! for perio!s longer t,an a year as t,e raising of s,ort-term fun!s takes place on ot,er markets 0e.g.7 t,e money market1. T,e capital market inclu!es t,e stock market 0e:uity securities1 an! t,e 2on! market 0!e2t1.

3. Organi'ation of markets!"
6 market can 2e organi<e! as an auction7 a pri5ate electronic market7 a commo!ity +,olesale market7 a s,opping center7 a comple/ institution suc, as a stock market7 6n informal !iscussion 2et+een t+o in!i5i!uals.

Markets of 5arying types can spontaneously arise +,ene5er a party ,as interest in a goo! or ser5ice t,at some ot,er party can pro5i!e. #ence t,ere can 2e a market for cigarettes in correctional facilities7 anot,er for c,e+ing gum in a playgroun!7 an! yet anot,er for contracts for t,e future !eli5ery of a commo!ity. T,ere can 2e 2lack markets7 +,ere a goo! is e/c,ange! illegally an! 5irtual markets7 suc, as e=ay7 in +,ic, 2uyers an! sellers !o not p,ysically interact !uring negotiation. T,ere can also 2e markets for goo!s un!er a comman! economy !espite pressure to repress t,em.

Stock Exchange

#. Stock exchange

$tock e/c,ange

ntro!uction

(ole

#istory

)isting of securities

$ecurities

*+ner s,ips

Types of operators

-uture

Tra!ing process

Types

Stock Exchange

"

1. (ntroduction!"
6 stock exchange7 0formerly a securities e/c,ange1 is a corporation or mutual organi<ation +,ic, pro5i!es >tra!ing> facilities for stock 2rokers an! tra!ers7 to tra!e stocks an! ot,er securities. $tock e/c,ange is a ,ig,ly organi<e! market +,ere securities are purc,ase! an! sol!.

6 stock exchange is an organi<ation of +,ic, t,e mem2ers are stock 2rokers. 6 stock e/c,ange pro5i!es facilities for t,e tra!ing of securities an! ot,er financial instruments. ?sually facilities are also pro5i!e! for t,e issue an! re!emption of securities as +ell as ot,er capital e5ents inclu!ing t,e payment of income an! !i5i!en!s. T,e securities usually tra!e! on a stock e/c,ange inclu!e t,e s,ares issue! 2y companies7 unit trusts an! ot,er poole! in5estment pro!ucts as +ell as corporate 2on!s an! go5ernment 2on!s.

#. )istor% of Stock Exchanges

n 11t, century -rance t,e courtiers !e c,ange +as concerne! +it, managing an! regulating t,e !e2ts of agricultural communities on 2e,alf of t,e 2anks. 6s t,ese men also tra!e! in !e2ts7 t,ey coul! 2e calle! t,e first 2rokers. $ome stories suggest t,at t,e origins of t,e term >2ourse> come from t,e )atin 2ursa meaning a 2ag 2ecause7 in 13t, century =ruges7 t,e sign of a purse 0or per,aps t,ree purses17 ,ung on t,e front of t,e ,ouse +,ere merc,ants met. #o+e5er7 it is more likely t,at in t,e late 13t, century commo!ity tra!ers in =ruges gat,ere! insi!e t,e ,ouse of a man calle! @an !er =urse7 an! in 1309 t,ey institutionali<e! t,is until no+ informal meeting an! 2ecame t,e >=ruges =ourse>. T,e i!ea sprea! :uickly aroun! -lan!ers an! neig,2oring counties an! >=ourses> soon opene! in A,ent an! 6mster!am.

n t,e mi!!le of t,e 13t, century7 @enetian 2ankers 2egan to tra!e in go5ernment securities. n 13517 t,e @enetian Ao5ernment outla+e! sprea!ing rumors inten!e! to lo+er t,e price of go5ernment fun!s. T,ere +ere people in Bisa7 @erona7 Aenoa an! -lorence +,o also 2egan tra!ing in go5ernment securities !uring t,e 14t, century. T,is

Stock Exchange

+as only possi2le 2ecause t,ese +ere in!epen!ent city states rule! 2y a council of influential citi<ens7 not 2y a !uke.

T,e Cutc, later starte! 8oint stock companies7 +,ic, let s,are,ol!ers in5est in 2usiness 5entures an! get a s,are of t,eir profitsDor losses. n 1"027 t,e Cutc, 'ast n!ia Company issue! t,e first s,ares on t,e 6mster!am $tock '/c,ange. t +as t,e first company to issue stocks an! 2on!s. n 1"&&7 t,e tra!ing of stocks 2egan on a stock e/c,ange in )on!on.

*n May 1%7 1%927 t+enty-four supply 2rokers signe! t,e =utton+oo! 6greement outsi!e "& Eall $treet in 3e+ Fork un!erneat, a 2utton+oo! tree. *n Marc, &7 1&1%7 properties got rename! to 3e+ Fork $tock 4 '/c,ange =oar!. n t,e 19t, century7 e/c,anges 0generally famous as futures e/c,anges1 got su2stantiate! to tra!e futures contracts an! t,en c,oices contracts. T,ere are no+ a large num2er of stock e/c,anges in t,e +orl!.

*. Securities!"
T,e securities tra!e! on a stock e/c,ange inclu!e9 $,ares issue! 2y companies. Ce2entures. =on!s. To 2e a2le to tra!e a security on a certain stock e/c,ange7 it ,as to 2e liste! t,ere. ?sually t,ere is a central location at least for recor!keeping7 2ut tra!e is less an! less linke! to suc, a p,ysical place7 as mo!ern markets are electronics net+orks7 +,ic, gi5es t,em a!5antages of spee! an! cost of transactions. Tra!e on an e/c,ange is 2y mem2ers only. T,e initial offering of stocks an! 2on!s to in5estors is 2y !efinition !one in t,e primary market an! su2se:uent tra!ing is !one in t,e secon!ary market. 6 stock e/c,ange is often t,e most important component of a stock market. $upply an! !eman! in stock markets is !ri5en 2y 5arious factors +,ic,7 as in all free markets7 affect t,e price of stocks. T,ere is usually no compulsion to issue stock 5ia t,e stock e/c,ange itself7 nor must stock 2e su2se:uently tra!e! on t,e e/c,ange. $uc, tra!ing is sai! to 2e off e/c,ange or o5er t,e counter. T,is is t,e usual +ay t,at !eri5ati5es an! 2on!s are tra!e!. ncreasingly7 stock e/c,anges are part of a glo2al market for securities

Stock Exchange

&

Shares!"
T,e total aut,ori<e! capital in t,e company is !i5i!e! into small units an! eac, is in!i5i!ually calle! G$,areH. Fou can 2uy large or small lots to matc, t,e amount of money you +ant to in5est. E,en t,e company !oes +ell7 its s,ares can rise in 5alue. f t,e company ,its a 2a! patc,7 its s,are can fall in 5alue. T,e s,ares are consi!ere! as t,e main source to raise companyIs capital.

Share )older!"
T,e people +,o pro5i!e finance to company 2y purc,asing s,ares are calle! s,are,ol!ers.

$%&es of shares!"
1. Preference Shares! T,ese are s,ares +,ose ,ol!ers ,a5e preferential rig,ts in respect of t,e payment of !i5i!en! an! repayment of capital in t,e e5ent of +in!ing up. T,e rate of !i5i!en! on t,ese s,ares is fi/e!. T,ere are furt,er t+o types of preference s,ares. Cumulati5e preference s,ares9 f t,e profit if company is not enoug, to pay !i5i!en! on any kin! of s,ares at t,e en! of financial year t,an t,e rig,t of !i5i!en! on t,ese s,ares accumulates until all arrears of unpai! !i5i!en! ,a5e 2een pai!. 3on-Cumulati5e preference s,ares9 T,ese are t,e s,ares on +,ic, if !i5i!en! is not pai! out of current years profit in any year t,en it is ne5er pai!. #. Ordinar% Shares! T,ese s,ares are t,e s,ares on +,ic, !i5i!en! is not pai! at fi/e! rate. *r!inary s,are,ol!ers recei5e t,e !i5i!en! proportionally out of profit earne! 2y t,e company after t,e payment of fi/e! !i5i!en! on preference s,ares. *. +eferred Shares! T,e s,are issue! to promoters of t,e company is calle! !eferre! or foun!ers s,ares. T,e !i5i!en! on t,ese s,ares is pai! after t,e payment of !i5i!en! on all ot,er types of s,ares. 4.

$%&es of o&erators on stock exchange

T,e operators +,o 2uy an! sell securities on stock e/c,ange are of se5eral types. $ome of t,em are !escri2e! 2elo+9 1. ,rokers!

Stock Exchange

6 2roker is a mem2er of t,e stock e/c,ange. #e 2uys an! sells t,e securities on t,e 2e,alf of t,e outsi!ers +,o are not t,e mem2ers. #e c,arges 2rokerage for ,is ser5ices. #e !oes not speciali<e in any particular security. #e 2uys sells all types of securities accor!ing to t,e or!ers place! 2y ,is clients. #. -o..ers! T,e 8o22er is a mem2er of stock e/c,ange 2ut ,e 2uys an! sells securities on ,is o+n 2e,alf. #e is a !ealer in securities. #e usually speciali<es in one type of security. #is income comes from t,e profit or price !ifference in t,e purc,ase an! sale of securities. 6 8o22er normally !eals for ,imself 2ut ,e is not pro,i2ite! from 2uying an! selling securities on t,e 2e,alf of ot,ers. *. ,ulls! 6 2ull is a speculator +,o e/pects a rise in prices. T,erefore7 ,e 2uys securities +it, a 5ie+ to sell t,em in future at a ,ig,er price t,ere2y make profit. E,en t,e con!itions in t,e stock e/c,ange are !ominate! 2y 2ulls7 it is calle! a G2ullis, marketH. E,en t,e prices fall an! 2ulls ,a5e to sell at loss7 it is calle! G2ull li:ui!ationH. 4. ,ears! 6 2ear is a speculator e/pects fall in prices. T,erefore7 ,e sells securities for future !eli5ery. #e sells securities7 +,ic, ,e !oes not possess. #e sells +it, t,e ,ope to 2uy t,e securities at lo+er price 2efore t,e !ate of !eli5ery. T,e efforts of 2ears to 2ring !o+n t,e prices artificially are kno+n as G2ear rai!sH. E,en 2ears !ominate t,e market7 it is calle! a G2earis, marketH. E,en prices are rise an! 2ears ,a5e to make purc,ases to meet t,eir commitments7 it is calle! G2ear co5eringH.

/. $rading &rocedure on Stock Exchange


n or!er to purc,ase or sell securities on a stock e/c,ange7 t,e follo+ing steps ,a5e to 2e taken9 1. Selection of ,roker!

6 2roker is a mem2er of stock e/c,ange an! securities can only 2e purc,ase! an! sol! t,roug, ,im. 6fter selecting t,e 2roker t,e in5estor ,as to con5ince t,e 2roker to 2uy or sell securities on ,is 2e,alf. -or t,is purpose7 t,e in5estor may ,a5e to make an a!5ance or gi5e references of a 2ank or some ot,er persons. #. Placing the order!

T,ere are t,ree parties in5ol5e! in t,e !ealing of s,ares9 T,e $tock =roker

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T,e Client T,e Jo22er T,e stock 2roker simply acts as agent an! contacts t,e particular 8o22er in t,e stock e/c,ange on 2e,alf of t,e client. #e !oes not !isclose to t,e 8o22er +,et,er ,e is a 2uyer or seller of s,ares. #e t,erefore7 asks ,im to :uote t+o prices9 . T,e upper prices at +,ic, ,e is rea!y to sell t,e s,ares. . T,e lo+er prices at +,ic, ,e is rea!y to 2uy t,e s,ares. -or '/ample7 Mr. 6li +ants to sell one t,ousan! s,ares of a Company. #e contacts a 2roker !ealing on t,e stock e/c,ange. T,e 2roker asks a 8o22er to gi5e :uotations. #e !oes not !isclose t,e 8o22er +,et,er ,e +ants 2uy or sell t,e s,ares of a company. T,e 8o22er gi5es t+o prices7 one at +,ic, ,e is +illing to sell an! t,e ot,er at +,ic, ,e is rea!y to 2uy. -or instance7 t,e t+o :uote! prices are (s.21.90 an! (s.22.00 in a t,ousan!. T,is means 2roker is +illing to purc,ase at (s.21.90 an! sell at (s.22.00 per s,are. f t,e 2roker is not satisfie!7 ,e can go to anot,er 8o22er or ask t,e first one to make it closer 0i.e. to re!uce t,e margin 2et+een 2uying an! selling1. f t,e 2roker is satisfie! +it, t,e ne+ :uotation7 ,e t,en contacts +it, ,is client informs ,im t,e 2i! of t,e s,are. f t,e client agrees to t,e 2i! price7 t,en 2argain is struck

*.

Pre&aring the contract note!

T,e stock 2roker prepares a contact note7 one copy of +,ic, is gi5en to t,e clientK secon! one to t,e 8o22er an! t,e t,ir! remains +it, t,e 2roker. T,e contact note generally contains t,e follo+ing information9 3ame an! t,e a!!ress of t,e stock2roker. T,e name an! a!!ress of t,e 8o22er. T,e type an! price of t,e s,are. T,e commission of t,e 2roker. T,e !ate of transaction 0. Settlement! n case of rea!y !eli5ery contract7 t,e 2uyer pays t,e money an! t,e seller !eli5ers t,e securities one same !ay. n t,e case of for+ar! !eli5ery contracts settlements are !one in a +eek or once in a mont,.

*n t,e settlement !ay7 t,e !ifference in t,e purc,ase an! t,e sell price may 2e pai! +it,out any !eli5ery of securities. T,e parties may also postpone t,e !eal to t,e ne/t settlement !ate t,roug, mutual consent. T,is is kno+n as Gcarryo5erH or G2u!laH.

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1.2ole of Stock Exchange in econom%


$tock e/c,anges ,a5e multiple roles in t,e economy7 t,is may inclu!e t,e follo+ing9 1. 2aising ca&ital for .usinesses! T,e $tock '/c,ange pro5i!es companies +it, t,e facility to raise capital for e/pansion t,roug, selling s,ares to t,e in5esting pu2lic. t in!uces people to sa5e an! in5est in securities. T,ere is regular pu2licity of its operations7 +,ic, encourages sa5ings an! in5estments. Beople kno+ t,at +,en t,ey nee! money7 t,ey can easily sell t,ere securities on stock e/c,ange. T,erefore7 t,ey are more +illing to in5est t,ere sa5ings in securities. T,us a stock e/c,ange ser5es as an instrument for raising capital. #.

o.ili'ing savings for investment!

E,en people !ra+ t,eir sa5ings an! in5est in s,ares7 it lea!s to a more rational allocation of resources 2ecause fun!s7 +,ic, coul! ,a5e 2een consume!7 or kept in i!le !eposits +it, 2anks7 are mo2ili<e! an! re!irecte! to promote 2usiness acti5ity +it, 2enefits for se5eral economic sectors suc, as agriculture7 commerce an! in!ustry7 resulting in stronger economic gro+t, an! ,ig,er pro!ucti5ity le5els an! firms. *.

Facilitating com&an% growth!

Companies 5ie+ ac:uisitions as an opportunity to e/pan! pro!uct lines7 increase !istri2ution c,annels7 ,e!ge against 5olatility7 increase its market s,ares7 or ac:uire ot,er necessary 2usiness assets. 6 takeo5er 2i! or a merger agreement t,roug, t,e stock market is one of t,e simplest an! most common +ays for a company to gro+ 2y ac:uisition or fusion. 0. 2edistri.ution of wealth! $tock e/c,anges !o not e/ist to re!istri2ute +ealt,. #o+e5er7 2ot, casual an! professional stock in5estors t,roug, !i5i!en!s an! stock price increases t,at may result in capital gains +ill s,are in t,e +ealt, of profita2le 2usinesses. /.

Cor&orate governance!

=y ,a5ing a +i!e an! 5arie! scope of o+ners7 companies generally ten! to impro5e on t,eir management stan!ar!s an! efficiency in or!er to satisfy t,e !eman!s of t,ese s,are,ol!ers an! t,e more stringent rules for pu2lic corporations impose! 2y pu2lic stock e/c,anges an! t,e go5ernment. Conse:uently7 it is allege! t,at pu2lic companies 0companies t,at are o+ne! 2y s,are,ol!ers +,o are mem2ers of t,e general pu2lic an! tra!e s,ares on pu2lic e/c,anges1 ten! to ,a5e 2etter management recor!s t,an pri5ately-,el! companies 0t,ose companies +,ere s,ares are not pu2licly tra!e!7 often o+ne! 2y t,e company foun!ers an!Lor t,eir families an! ,eirs7 or ot,er+ise 2y a small group of in5estors1. #o+e5er7 some +ell-!ocumente! cases are kno+n +,ere it is allege! t,at t,ere ,as 2een consi!era2le slippage in corporate go5ernance on t,e part of some pu2lic companies. T,e !ot-com 2u22les in t,e early 2000s7 an! t,e su2prime mortgage crisis in 200%-0&7 are classical

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e/amples of corporate mismanagement. Companies like Bets.com 0200017 'nron corporation 0200117 *ne.Tel 0200117 $un2eam 0200117 Ee25an 0200117 6!elp,ia 0200217 MC Eorl!Com 0200217 Barmlat 0200317 6merican nternational Aroup 0200&17 )e,man =rot,ers 0200&17 an! $atyam Computer $er5ices 020091 +ere among t,e most +i!ely scrutini<e! 2y t,e me!ia. 1.

Creating investment o&&ortunities for small investors!

6s oppose! to ot,er 2usinesses t,at re:uire ,uge capital outlay7 in5esting in s,ares is open to 2ot, t,e large an! small stock in5estors 2ecause a person 2uys t,e num2er of s,ares t,ey can affor!. T,erefore t,e $tock '/c,ange pro5i!es t,e opportunity for small in5estors to o+n s,ares of t,e same companies as large in5estors. 3.

4overnment ca&ital"raising for develo&ment &rojects!

Ao5ernments at 5arious le5els may !eci!e to 2orro+ money in or!er to finance infrastructure pro8ects suc, as se+age an! +ater treatment +orks or ,ousing estates 2y selling anot,er category of securities7 kno+n as 2on!s. T,ese 2on!s can 2e raise! t,roug, t,e $tock '/c,ange +,ere2y mem2ers of t,e pu2lic 2uy t,em7 t,us loaning money to t,e go5ernment. T,e issuance of suc, 2on!s can o25iate 0to remo5e1 t,e nee! to !irectly ta/ t,e citi<ens in or!er to finance !e5elopment7 alt,oug, 2y securing suc, 2on!s +it, t,e full fait, an! cre!it of t,e go5ernment instea! of +it, collateral 0si!e 2y si!e17 t,e result is t,at t,e go5ernment must ta/ t,e citi<ens or ot,er+ise raise a!!itional fun!s to make any regular coupon payments an! refun! t,e principal +,en t,e 2on!s mature. 5.

,arometer of the econom%!

6t t,e stock e/c,ange7 s,are prices rise an! fall !epen!ing7 largely7 on market forces. $,are prices ten! to rise or remain sta2le +,en companies an! t,e economy in general s,o+ signs of sta2ility an! gro+t,. 6n economic recession7 !epression7 or financial crisis coul! e5entually lea! to a stock market cras,. T,erefore t,e mo5ement of s,are prices an! in general of t,e stock in!e/es can 2e an in!icator of t,e general tren! in t,e economy. 6.

2egulation of com&anies!

T,e stock e/c,ange e/ercises a +,olesome influence on t,e management of companies. 6 company t,at +ants to 2e liste! on stock e/c,ange must 2in! itself to t,e rules an! regulations prescri2e! 2y t,e stock e/c,ange. 17.

Em&lo%ment O&&ortunities!

$tock e/c,ange pro5i!es employment opportunities to t,e 8o22ers an! ot,er mem2ers +,o perform t,ere acti5ities in t,e stock e/c,ange. $o it is an important source of employment not only for in5estors 2ut also for t,e mem2ers an! t,ere employees.

3. 8isting of Securities on Stock Exchange

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6ll securities are not !ealt on stock e/c,ange. *nly t,ose securities are sol! or purc,ase! +,ic, are inclu!e! in tra!ing list of t,e stock e/c,ange. n or!er to get a security liste! on stock e/c,ange for tra!ing purposes7 t,e company issuing suc, a security must make an application along +it, follo+ing prescri2e! !ocuments. 11 Copies of memoran!um7 articles7 prospects7 !irectorsI report7 2alance s,eet an! agreement +it, un!er+riters. 21 $pecimen copies of s,ares7 !e2entures7 certificates7 letter of allotment an! acceptance7 etc. 31 41 51 "1 %1 Barticulars regar!ing capital structures. 6 statement s,o+ing t,e !istri2ution of s,ares. Barticulars of !i5i!en!s an! eac, 2onus !eclare! since its incorporation. Barticulars of s,ares an! !e2entures for eac,7 permission are re:uire!. 6 2rief ,istory of t,e companyIs acti5ities since its incorporation.

6fter t,e scrutiny of application7 if t,e stock e/c,ange aut,orities are satisfie!7 t,ey call upon t,e company to e/ecute t,e Mlisting agreementI. T,e listing agreement contains t,e follo+ing con!itions an! o2ligations9 11 T,e company must 2e fair to all t,e applicants for s,ares. n t,e case of o5er su2scription7 no un!ue preference +ill 2e s,o+n to any particular class of applicants. 21 To notify stock e/c,ange a2out t,e !ate of t,e 2oar! meeting at +,ic, !ecision of !i5i!en! is taken. 31 To for+ar! t,e copies of its annual accounts !uly au!ite! to t,e stock e/c,ange.

41 To notify t,e stock e/c,ange7 a2out any material c,ange or nature or feature of t,e companyIs 2usiness. 51 "1 To notify t,e stock e/c,ange any c,ange in t,e capital of t,e company. To notify t,e issue of any ne+ s,ares inclu!ing 2onus s,ares.

%1 To comply +it, all t,e re:uirements of t,e listing agreement an! not to commit any 2reac, of any con!ition. &1 To notify t,e stock e/c,ange of any occasion t,is +ill result in re!emption or cancellation of any liste! security. 91 To a5oi!7 t,e esta2lis,ment of a false market for t,e liste! securities.

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101 To supply t,e stock e/c,ange any ot,er information necessary to ena2le t,e s,are,ol!ers to kno+ a2out t,e companyIs position.

5. Ownershi& of Stock Exchange


$tock e/c,anges originate! as mutual organi<ations7 o+ne! 2y its mem2er stock 2rokers. T,ere ,as 2een a recent tren! for stock e/c,anges to !emutuali<e7 +,ere t,e mem2ers sell t,eir s,ares in an initial pu2lic offering. n t,is +ay t,e mutual organi<ation 2ecomes a corporation7 +it, s,ares t,at are liste! on a stock e/c,ange. '/amples are 6ustralian $ecurities '/c,ange 0199&17 'uro ne/t 0merge! +it, 3e+ Fork $tock '/c,ange17 36$C6N 0200217 t,e 3e+ Fork $tock '/c,ange 0200517 =olsas y Merca!os 'spaOoles7 an! t,e $Po Baulo $tock '/c,ange 0200%1. T,e $,en<,en an! $,ang,ai stock e/c,anges can 2een c,aracteri<e! as :uasi-state institutions insofar as t,ey +ere create! 2y go5ernment 2o!ies in C,ina an! t,eir lea!ing personnel are !irectly appointe! 2y t,e C,ina $ecurities (egulatory Commission.

6. $he future of stock exchanges


T,e future of stock tra!ing appears to 2e electronic7 as competition is continually gro+ing 2et+een t,e remaining tra!itional 3e+ Fork $tock '/c,ange specialist system against t,e relati5ely ne+7 all 'lectronic Communications 3et+orks7 or 'C3s. 'C3s point to t,eir spee!y e/ecution of large 2lock tra!es7 +,ile specialist system proponents cite t,e role of specialists in maintaining or!erly markets7 especially un!er e/traor!inary con!itions or for special types of or!ers. ?. 2ase! e/c,anges suc, as B)?$ Markets are increasing competition +it, tra!itional e/c,anges. T,e 'C3s conten! t,at an array of special interests profit at t,e e/pense of in5estors in e5en t,e most mun!ane e/c,ange-!irecte! tra!es. Mac,ine-2ase! systems7 t,ey argue7 are muc, more efficient7 2ecause t,ey spee! up t,e e/ecution mec,anism an! eliminate t,e nee! to !eal +it, an interme!iary. #istorically7 t,e ;market; 0+,ic,7 as note!7 encompasses t,e totality of stock tra!ing on all e/c,anges1 ,as 2een slo+ to respon! to tec,nological inno5ation7 t,us allo+ing gro+ing pure speculation to continue. Con5ersion to all-electronic tra!ing coul! ero!eLeliminate t,e tra!ing profits of floor specialists an! t,e 3F$';s >upstairs tra!ers>7 +,o7 like in $eptem2er an! *cto2er 200&7 earne! 2illions of !ollars selling s,ares t,ey !i! not ,a5e7 an! !ays later 2uying t,e same amount of s,ares7 2ut may2e 15 Q c,eaper7 so t,ese s,ares coul! 2e ,an!e! to t,eir 2uyers7 t,ere2y making t,e market fall !eeply. Eilliam )upine7 foun!er of t,e nstinet tra!ing system an! t,e *ptima system7 ,as 2een :uote! as saying > ;! !efinitely say t,e 'C3s are +inning... T,ings ,appen a+fully fast once you reac, t,e tipping point. Ee;re no+ at t,e tipping point.>

Stock Exchange

15

*ne e/ample of impro5e! efficiency of 'C3s is t,e pre5ention of front running7 2y +,ic, manual Eall $treet tra!ers use kno+le!ge of a customer;s incoming or!er to place t,eir o+n or!ers so as to 2enefit from t,e percei5e! c,ange to market !irection t,at t,e intro!uction of a large or!er +ill cause. =y e/ecuting large tra!es at lig,tning spee! +it,out manual inter5ention7 'C3s make impossi2le t,is illegal practice7 for +,ic, se5eral 3F$' floor 2rokers +ere in5estigate! an! se5erely fine! in recent years ?n!er t,e specialist system7 +,en t,e market sees a large tra!e in a name7 ot,er 2uyers are imme!iately a2le to look to see ,o+ 2ig t,e tra!er is in t,e name7 an! make inferences a2out +,y sL,e is selling or 2uying. 6ll tra!ers +,o are :uick enoug, are a2le to use t,at information to anticipate price mo5ements. 'C3s ,a5e c,ange! or!inary stock transaction processing 0like 2rokerage ser5ices 2efore t,em1 into a commo!ity-type 2usiness. 'C3s coul! regulate t,e fairness of initial pu2lic offerings 0 B*Is17 o5ersee #am2rec,t;s *pen B* process7 or measure t,e effecti5eness of securities researc, an! use transaction fees to su2si!i<e small- an! mi!-cap researc, efforts. #o+e5er7 2elie5e t,e ans+er +ill 2e some com2ination of t,e 2est of tec,nology an! >upstairs tra!ing> D in ot,er +or!s7 a ,y2ri! mo!el. Tra!ing 257000 s,ares of Aeneral 'lectric stock 0recent :uote9 R%.54K recent 5olume9 21"72""70001 +oul! 2e a relati5ely simple e-commerce transactionK tra!ing 100 s,ares of =erks,ire #at,a+ay Class 6 stock 0recent :uote9 R%27"25.00K recent 5olume9 &%%1 may ne5er 2e. T,e c,oice of system s,oul! 2e clear 02ut al+ays t,at of t,e tra!er17 2ase! on t,e c,aracteristics of t,e security to 2e tra!e!. '5en +it, 'C3s forming an important part of a national market system7 opportunities presuma2ly remain to profit from t,e sprea! 2et+een t,e 2i! an! offer price. T,at is especially true for in5estment managers t,at !irect ,uge tra!ing 5olume7 an! o+n a stake in an 'C3 or specialist firm. -or e/ample7 in its in!i5i!ual stock-2rokerage accounts7 >-i!elity n5estments runs 29Q of its un!esignate! or!ers in 3F$'-liste! stocks7 an! 3%Q of its un!esignate! market or!ers t,roug, t,e =oston $tock '/c,ange7 +,ere an affiliate controls a specialist post.>

17. Other t%&es of exchanges


n t,e 19t, century7 e/c,anges +ere opene! to tra!e for+ar! contracts on commo!ities. '/c,ange tra!e! for+ar! contracts are calle! futures contracts. T,ese commo!ity e/c,anges later starte! offering future contracts on ot,er pro!ucts7 suc, as interest rates an! s,ares7 as +ell as options contracts. T,ey are no+ generally kno+n as futures e/c,anges.

Stock Exchange

1"

*.

Functions of stock exchange

Function of SE

ain activities

Function as

6n organi<ation

n fa5or of in5estor

n fa5or of companies

Stock Exchange

1%

T,e functions of stock e/c,ange are as follo+ing 1. ain activities!

To promote t,e sa5ings an! for t,em to 2e canali<e! to+ar!s of carrying t,roug, in5estment pro8ects t,at ot,er+ise +oul!nIt 2e possi2le you nee! t,at t,e issuing institution of t,e securities to 2e a!mitte! for :uoting. T,e negotiations +ill 2e !one on t,e primary market. To pro5i!e li:ui!ity to t,e in5estors. T,e in5estor can recuperate t,e money in5este! +,en nee!e!. -or it7 ,e ,as to go to t,e stock e/c,ange market to sell t,e securities pre5iously ac:uire!. T,is function of t,e stock market is !one on t,e secon!ary market.

#. Functions as an organi'ation are!


To guarantee t,e legal an! economic security of t,e agree! contracts. To pro5i!e official information a2out t,e :uantities t,at are negotiate! an! of t,e :uote! prices. To fi/ t,e prices of t,e securities accor!ing to t,e fun!amental la+ of t,e offer an! t,e !eman!.

$pecifying a 2it more an! centering on t,e t+o main agents t,at inter5ene in t,e market7 in5estors an! companies7 +e coul! !o t,e follo+ing classification9 *. Functions in favor of the investor!

t permits ,im t,e access to t,e profita2le acti5ities of t,e 2ig companies. t offers li:ui!ity to t,e security in5estments7 t,roug, a place in +,ic, to sell or 2uy securities. t permits for t,e in5estor to ,a5e a political po+er in t,e companies in +,ic, ,e in5ests its sa5ings !ue t,at t,e ac:uisition of or!inary s,ares gi5es ,im t,e rig,t 0among ot,er t,ings1 to 5ote in t,e general s,are,ol!ers meetings of t,e company in :uestion.

Stock Exchange

1&

t offers t,e possi2ility of !i5ersifying your portfolio 2y enlarging t,e fiel! of strategy of in5estments !ue to alternati5e options7 as coul! 2e t,e !eri5e! market7 t,e money market7 etc.

0. Function in favor of the com&anies!

t supplies t,em +it, t,e o2taining of long-term fun!s t,at permits t,e company to make profita2le acti5ities or to !o !etermine pro8ects t,at ot,er+ise +oul!nIt 2e possi2le to !e5elop for lack of financing. 6lso7 t,is fun!ing signifies a less cost t,an if o2taine! at ot,er c,annels. T,e securities :uote! at t,e stock e/c,ange market usually ,a5e more fiscal purpose a!5antages for t,e companies. t offers to t,e companyIs free pu2licity7 +,ic, in ot,er +ay +oul! suppose consi!era2le e/penses. T,e institution is o28ecting of attention of t,e me!ia 0tele5ision7 ra!io7 etc.1 in case any important c,ange in its o+ners 0t,e s,are ,ol!ers1.

/. Constant following of the 9uotations. T,erefore +e can see ,o+ t,e stock e/c,ange market supposes a great a!5antage to t,e companies7 2ut t,ere are also some incon5eniences to ,a5e in min!9

-irst of all7 t,ey nee! of a series of con!itions to 2e apt to enter to t,e :uotations7 not all t,e companies t,at apply can !o it. T,e issuing of s,ares may suppose a loss of po+er for t,e foun!ers of t,e company. 6ny+ay7 t,is is 5ery relati5e 2ecause it +ill !epen! on t,e gra!e of atomi<ation on t,e participations of t,e ne+ s,are,ol!ers an! of t,e percentage of s,ares t,at t,e foun!ers keep o5er t,e total capital of t,e company. f for e/ample a 49Q of t,e s,are capital is in ,an!s of t,e foun!ers7 t,ese coul! loose t,e control of in case t,e ot,er 51Q +oul! 2e in ,an!s of one main s,are,ol!er. #o+e5er7 t,is rarely ,appens7 !ue t,at t,e s,are capital t,at usually goes to t,e stock market ten!s to 2e !istri2ute! 2et+een a great num2er of s,are,ol!ers t,at ac:uire mo!est participations in respect to t,at of t,e capital of t,e company t,e foun!ers may still keep control +it, s,are capital is !istri2ute! 2et+een a great num2er of participants.

Stock Exchange

19

3o+ t,en7 t,e property of t,ese s,ares implies t,e possession of certain rig,ts o5er t,e company in +,ic, you participate.

T,ese are9 political rig,ts7 among +,ic, appears t,e possi2ility of participating in t,e general s,are ,ol!ers meetings an! in t,e a!ministration of t,e company 2y means of t,e e/ecution of your rig,ts to 5oteK an! t,e economic rig,t7 +,ic, em2races t,e possi2ility of recei5ing !i5i!en!s7 preferential rig,ts of su2scription7 t,e transmission of s,ares 0selling1 an! t,e rig,t to t,e li:ui!ity 5alue. T,is last implies t,at at t,e moment in +,ic, t,e company is li:ui!ate!7 +,at remains is proportionally !i5i!e! 2et+een t,e s,are,ol!ers. /. $he &ossession of all these rights is what reduces the &ower of the founders.

T,e s,ares may pass to 2e property of unkno+n people to t,e foun!ers. 6t t,e moment in +,ic, t,ey are o28ect of :uotations at t,e stock e/c,ange market any supplier of capital may ,a5e t,em. f itIs a company t,at pre5iously kne+ all its s,are,ol!ers7 consi!ering t,is as an asset of 5alue to t,e company. T,e stock market :uotation may generate an important c,ange t,at +ill not al+ays 2e positi5e.

T,e companies t,at are :uote! at t,e stock market offer a 2etter transparency7 in a +ay t,at t,e general pu2lic may ,a5e access to any information relate! to t,eir e5olution an! acti5ities.

T,is makes t,em ,a5e a greater control an! to super5ise e5ery mo5ement !one.

Stock Exchange

20

*.

ajor stock exchange

Eorl! ma8or $'

(egions

6merica

6frica

6sia

'urope

T+enty Ma8or $tock '/c,anges n T,e Eorl!9 Market Capitali<ation 4 Fear-to-!ate Total Turno5er at t,e en! of 6ugust 2009

Stock Exchange

21

(egion

$tock '/c,ange

Market @alue 0millions ?$C1 "907%9%.5 27&4%7535.2 17032751&.4 174327&%%.0 107&427001.9

Total $,are Turno5er 0millions ?$C1 21071&0.& 1973437&"&.3 3"17959.0 %9&7193.1 12715&7"20."

6frica 6mericas 6mericas 6mericas 6mericas 6siaBacific 6siaBacific 6siaBacific 6siaBacific 6siaBacific 6siaBacific 6siaBacific 6sia-

Jo,annes2urg $ecurities '/c,ange 36$C6N $Po Baulo $tock '/c,ange Toronto $tock '/c,ange 3e+ Fork $tock '/c,ange

6ustralian $ecurities '/c,ange

170""7513.2

5"07912.&

=om2ay $tock '/c,ange

170&275%2.0

1%171%".2

#ong .ong $tock '/c,ange

17945751%.%

9%0722%."

.orea '/c,ange

%2%7125.3

1705074%3.&

3ational $tock '/c,ange of n!ia

170197109.0

50"7"52.3

$,ang,ai $tock '/c,ange

271427%5".&

373157%"&.5

$,en<,en $tock '/c,ange

59"7320.2

17%01725".&

Tokyo $tock '/c,ange

374%&7"02.5

27"%579&3.3

Stock Exchange

22

Bacific 'urope 'urope 'urope 'uro ne/t -rankfurt $tock '/c,ange 0Ceutsc,e =Srse1 )on!on $tock '/c,ange Ma!ri! $tock '/c,ange 0=olsas y Merca!oIs 'spaOoles1 Milan $tock '/c,ange 0=ursa taliana1 3or!ic $tock '/c,ange Aroup *MT1 $+iss '/c,ange 27"05709%." 172047292.0 275"07491.1 1719579"2.2 175&97%3".% 27321751&.5

'urope

171%&7525."

170407%51.1

'urope 'urope 'urope

"3"7"%4.& %&1714".3 992735".4

5"57%59.3 5037049.9 5207&"%.5

0. Stock exchange of Pakistan

Stock Exchange

23

Bakistan stock e/c,ange

.arac,i stock e/c,ange 0.$'1

)a,ore stock e/c,ange 0)$'1

slama2a! stock e/c,ange 0 $'1

1.

:arachi Stock Exchange

Stock Exchange

24

T,e .arac,i $tock '/c,ange or .$' is t,e first stock e/c,ange locate! in .arac,i7 $in!,7 Bakistan -oun!e! in 194%K it is Bakistan;s largest an! ol!est stock e/c,ange7 +it, many Bakistani as +ell as o5erseas listings. ts current premises are situate! on $tock '/c,ange (oa!7 in t,e ,eart of .arac,i;s =usiness Cistrict. )ater on t+o more stock e/c,anges +ere forme! in )a,ore 019%11 an! slama2a! 019921 to facilitate t,e in5estment in securities. T,e in5estors get opportunities of international in5estment !ue to contract of BakistanIs stock e/c,anges +it, ot,er countries. T,e stock e/c,ange not only informs t,e in5estors a2out international 2usiness tren!s 2ut also plays important role in strengt,ening t,e economy of t,e country.

)istor%!"
T,e .$' is t,e first stock e/c,ange locate! in .arac,i7 $in!,7 Bakistan -oun!e! in 194%K it is Bakistan;s largest an! ol!est stock e/c,ange7 +it, many Bakistani as +ell as o5erseas listings. ts current premises are situate! on $tock '/c,ange (oa!7 in t,e ,eart of .arac,i;s =usiness Cistrict.

$rading!"
T,e e/c,ange ,as Bre-market sessions from 09915am to 09930am. 3ormal tra!ing sessions from 09930am to 03930pm. t is t,e secon! ol!est stock e/c,ange in $out, 6sia. T,e .arac,i stock e/c,ange ,as un!ergone a consi!era2le !eal of !o+nturn partly !ue to glo2al financial crisis an! partly on account of !omestic trou2les. t remaine! suspen!e! in e/cess of 4 mont,s an! resume! normal tra!ing only on Cecem2er 157 200&. T,e .$' 100 n!e/ an! .$' 30 n!e/ after ,itting t,e lo+ aroun! mi! January ,as no+ re 2ounce! an! reco5ere! 20-25Q till Marc, 12t, 2009.

4rowth!"
T,e .$' is t,e 2iggest an! most li:ui! e/c,ange in Bakistan an! in 20027 it +as !eclare! as t,e G=est Berforming $tock Market of t,e Eorl!H. 6s of Cecem2er 207 200%7 "%1 companies +ere liste! +it, t,e market capitali<ation of (s. 43"4.312 2illion 0?$R %3 =illion1 ,a5ing liste! capital of (s. %1%.3 2illion 0?$R 12 2illion1. *n Cecem2er 2"7 200%7 t,e .$' 100 n!e/ reac,e! its e5er ,ig,est 5alue an! close! at 147&14.&5 points. -oreign 2uying interest ,a! 2een 5ery acti5e on t,e .$' in 200" an! continue! in 200%. 6ccor!ing to estimates from t,e $tate =ank of Bakistan7 foreign in5estment in capital markets total a2out ?$R523 Million. 6ccor!ing to a researc, analyst in Bakistan7 aroun! 20pc of t,e total free float in .$'-30 n!e/ is ,el! 2y foreign participants.

Stock Exchange

25

.$' ,as seen some fluctuations since t,e start of 200&. *ne reason coul! 2e t,at it is t,e election year in Bakistan7 an! stocks are e/pecte! to remain !ull. .$' ,as set an all time ,ig, of 157000 points7 2efore settling aroun! t,e 147000 mark. .arac,i stock e/c,ange =oar! *f Cirectors 0200%1 announce! plans to construct a 40 story ,ig, rise .$' 2uil!ing7 as a ne+ !irection for future in5estment. Cisputes 2et+een in5estors an! mem2ers of t,e '/c,ange are resol5e! t,roug, !eli2erations of t,e 6r2itration Committee of t,e '/c,ange. .$' 2egan +it, a 50 s,ares in!e/. 6s t,e market gre+ a representati5e in!e/ +as nee!e!. *n 3o5em2er 1st7 91 t,e .$'-100 +as intro!uce! an! remains to t,is !ay t,e most generally accepte! measure of t,e '/c,ange. .arac,i $tock '/c,ange 100 n!e/ 0.$'-100 n!e/1 is a 2enc,mark use! to compare prices o5ertime7 companies +it, t,e ,ig,est market capitali<ation are selecte!. To ensure full market representation7 t,e company +it, t,e ,ig,est market capitali<ation from eac, sector is also inclu!e!. n 1995 t,e nee! +as felt for an all s,are in!e/ to reconfirm t,e .$'-100 an! also to pro5i!e t,e 2asis of in!e/ tra!ing in future. *n 6ugust t,e 29t,7 1995 t,e .$' all s,are in!e/ +as constructe! an! intro!uce! on $eptem2er7 1&7 1995.

#775 :arachi Stock Exchange Crisis


;&ril #7!" .arac,i $tock '/c,ange ac,ie5e! a ma8or milestone +,en .$'-100 n!e/ crosse! t,e psyc,ological le5el of 157000 for t,e first time in its ,istory an! peake! 157%3%.32 on 20 6pril7 200&. Moreo5er7 t,e increase of %.4 per cent in 200& ma!e it t,e 2est performer among ma8or emerging markets. a% #*!"

(ecor! ,ig, inflation in t,e mont, of May7 200& resulte! in t,e une/pecte! increase in t,e interest rates 2y $tate =ank of Bakistan +,ic, e5entually resulte! in s,arp fall in .arac,i $tock '/c,ange. -ul% 13 !"

6ngry in5estors attacke! t,e .arac,i $tock '/c,ange in protest at plunging Bakistani s,are prices. -ul% 11 !"

Stock Exchange

2"

.$'-100 n!e/ !roppe! one-t,ir! from an all-time ,ig, ,it in 6pril7 200& as rising pressure on s,aky Bakistan;s coalition go5ernment to tackle Tali2an militants e/acer2ates concern a2out t,e country;s economic +oes. ;ugust 15!"

.$' 100 n!e/ rose more t,an 4Q after t,e announcement of t,e resignation of Bresi!ent Ber5e< Mus,araf 2ut Cre!it $uisse Aroup sai! t,at Bakistan;s Bost-Mus,araf rally in $tock '/c,ange +ill 2e s,ort-li5e! 2ecause of a rising fiscal !eficit an! runa+ay inflation. ;ugust #5 !"

.arac,i $tock '/c,ange set a floor for stock prices to ,alt a plunge t,at ,as +ipe! out R3".9 2illion of market 5alue since 6pril. +ecem.er 1/!"

Tra!ing resumes after t,e remo5al of floor on stock prices t,at +as set on 6ugust 2& to ,alt s,arp falls. :SE Stock indices!"

Stock indices!"

6 stock in!e/ is a met,o! of measuring a section of t,e stock market. T,ere are t+o 2ig in!ices use! in .arac,i $tock '/c,ange.

:SE 177 (ndex


.arac,i $tock '/c,ange 100 n!e/ 0.$'-100 n!e/1 is a stock in!e/7 acting as a 2enc,mark to compare prices on t,e .arac,i $tock '/c,ange 0.$'1 o5er a perio! of time. n !etermining representati5e companies to compute t,e in!e/ on7 companies +it, t,e ,ig,est market capitali<ation are selecte!. #o+e5er7 to ensure full market representation7 t,e company +it, t,e ,ig,est market capitali<ation from eac, sector is also inclu!e!.

)istor%!"
T,e in!e/ +as launc,e! in late 1991 +it, a 2ase of 17000 points. =y 20017 it ,a! gro+n to 17%%0 points. =y 20057 it ,a! skyrockete! to 979&9 points. t t,en reac,e! a peak of 1272&5 in -e2ruary 200%. .$'-100 in!e/ touc,e! t,e ,ig,est e5er 2enc,mark of 147&14 points on Cecem2er 2"7 200%7 a !ay 2efore t,e assassination of former Brime Minister =ena<ir =,utto7 +,en t,e in!e/ nose!i5e!. T,e in!e/ reco5ere! :uickly in 200&7 reac,ing ne+ ,ig,s near 157500 in 6pril. #o+e5er7 2y 3o5em2er 227 200& !uring t,e glo2al financial crisis of 200&7 it ,a! fallen to 971&%.

Stock Exchange

2%

$o& *7 :SE 177 (ndex com&anies!"


T,e follo+ing is a list of 30 companies +it, t,e ,ig,est market capitali<ation 5olume an! t,eir respecti5e +eig,t ages in t,e in!e/ an! account for o5er &0Q of t,e .$' in!e/ as of -e2ruary 207 200&9

<um.er 1 2 3 4 5 " % & 9 10 11 12 13 14 15 1" 1% 1& 19 20 21 22 23 24

Com&an% <ame *ACC) MC= 3ational =ank *f Bakistan Bakistan Betroleum $tan!ar! C,artere! =ank BTC) ?nite! =ank )imite! Bakistan $tate *il 6llie! =ank )imite! 3estle Bakistan Bakistan *ilfiel!s -u8i -ertili<er Company 6=3 6M(* 'ngro C,emical 6rif #a2i2 $ecurities 3 = =ank .ot 6!!u Bo+er Company '-? Aeneral nsurance =ank *f Bun8a2 -u8i -ertili<er =in Nasim =ank 6lfalfa 6!am 8ee nsurance Bakistan To2acco Company

Weight age =>? 14.14 %.1% 5.43 5.0" 4.41 4.2& 4.13 2.0& 2.01 1.93 1.%1 1."& 1."3 1.45 1.40 1.2% 1.19 1.1" 1.13 1.0" 1.03 1.01 0.99

arket Ca&itali'ation =P:2? 550794&79307000 2%975&371507000 2117%2"79007000 19%720170&07000 1%17%047&007000 1""7&107&007000 1"1702571"07000 1037"0070007000 &1703474407000 %&73%17"%07000 %572&072507000 ""7&2472207000 "57"0%73907000 "37"""73%07000. 5"749279907000 547""070007000 49732072507000 4"75"574007000 45730070007000 437&"970307000 4174%474&07000 3979%570007000 39725&73007000 3&7%0%72&07000

Ja,angir $i!!i:ui 4Company 2.""

Stock Exchange

2&

25 2" 2% 2& 29 30

$ui 3ort,ern Aas Bipeline #u2 Bo+er Company #a2i2 Metropolitan =ank '-? )ife 6ssurance )ucky Cement

0.9& 0.9& 0.91 0.&9 0.&"

3&730071007000 3&712&72407000 3575497"207000 35735472&07000 347%5070007000 33759374&07000

Ca+oo! #ercules C,emicals 0.91

:SE"*7 (ndex!
T,e .arac,i $tock '/c,ange ,as launc,e! t,e .$'-30 n!e/ +it, 2ase 5alue of 107000 points7 formally implemente! from -ri!ay7 $eptem2er 17 200". T,e main feature of t,is in!e/ t,at makes it !ifferent from ot,er in!ices are9

.$'-30 in!e/ is 2ase! only on t,e free-float of s,ares7 rat,er t,an on t,e 2asis of pai!-up capital. +,en a company announces a !i5i!en!7 t,e ot,er in!ices at .$' are not re!uce!La!8uste! for t,at amount of !i5i!en! 0+,et,er cas, or 2onus1.E,ereas7 .$'-30 n!e/ is a!8uste! for !i5i!en!s an! rig,t s,ares.

T,e ot,er in!e/ in .arac,i $tock '/c,ange represents total return of t,e market. T,at is7

6t t,e en! of 13 July7 200%7 .$'-30 n!e/ ,as reac,e! its ,ig,est e5er le5el of 1%71"2.45.
arket (ndices!"

.$' 2egan +it, a 50 s,ares in!e/. 6s t,e market gre+ a representati5e in!e/ +as nee!e!. *n 3o5em2er 17 1991 t,e .$'-100 +as intro!uce! an! remains to t,is !ate t,e most generally accepte! measure of t,e '/c,ange. T,e .$'-100 is a capital +eig,te! in!e/ an! consists of 100 companies representing a2out 90 percent of market capitali<ation of t,e '/c,ange. n 1995 t,e nee! +as felt for an all s,are in!e/ to reconfirm t,e .$'-100 an! also to pro5i!e t,e 2asis of in!e/ tra!ing in future. *n 6ugust 2971995 t,e .$' all s,are in!e/ +as constructe! an! intro!uce! on $eptem2er 1&7 1995. onthl% Performance!" Market mont,ly performance !uring t,e perio! January 200" to 6pril 2009 is gi5en un!er +it, ,ig, rate! in!e/ s,o+ing in 2ol! te/t. T,e ,ig,est e5er closing for .$' 100 n!e/ +as ac,ie5e! at 157"%".34 points on 1& 6pril7 200&. -ollo+ing a staggering loss of 42 per cent in four mont,s 06pril 200& to 6ugust 200&17 t,e regulators ,a! put planks un!er t,e .$'-100 in!e/ at 97144 points on 6ugust 2&7 200& to

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pre5ent a furt,er fall. T,e floor +as finally remo5e! on Cecem2er 157 200& t,at ,a! 2roug,t t,e 2ourse to a 5irtual ,alt for more t,an 100 !ays.

3um2er 1 2 3 4 5 " % & 9 10 11 12 13 14 15 1" 1% 1& 19 20 21 22 23

@olume

n!e/

Cate 02L01L200"

4027"397040 97"%2.4%

&05749470&0 10749%.0% 01L02L200" %"179"07000 1174%3.99 01L03L200" 3&%70007&9" 1175%3.94 03L04L200" 3317&&4792& 1175%2.94 02L05L200" 251731%70%2 1071&3.%% 01L0"L200" 152744&709" 97"03.%1 03L0%L200"

2&4752"7&&0 10750%.09 01L0&L200" 1%17"&27"24 1071%0.9% 01L09L200" 2247"94752& 107"1".24 02L10L200" 31079&57"9" 117011.13 01L11L200" 1%270527400 1073&&.19 01L12L200" 3972007120 1070""."& 03L01L200%

4&07905721" 117349.44 01L02L200% 22971&&7400 11720%."4 01L03L200% %3744%7224 1172%%.13 02L04L200%

431750&744& 127433.%" 02L05L200% 4"071""7%&4 127933."" 01L0"L200% 4%17%0&7992 137929.%0 02L0%L200% 32"79&3700& 137"&9.03 01L0&L200% 1%979"37"4& 127233.14 03L09L200% 3"%72427%52 137%3%.%4 01L10L200% 32&70%174&& 137932.41 01L11L200%

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24 25 2" 2% 2& 29 30 31 32 32 34 35 3" 3% 3& 39 40 41

13%7&%97220 137925.59 03L12L200% 3%570%47240 137""".&5 01L01L200& 151735&71"0 1379%4.40 01L02L200& 19"70&37""0 147&1".50 03L03L200& 21&73997&20 157210.1% 01L04L200& 25%79"5745" 14795".&2 02L05L200& 1"97125745" 1272&1.20 02L0"L200& "07%517&20 %27&357000 237"917000 175"07000 45%7000 1027000 %574347000 127221.53 01L0%L200& 1071%1.39 01L0&L200& 97210.15 971%&.9% 971&3.14 971&%.10 57%53.1& 01L09L200& 0"L10L200& 03L11L200& 01L12L200& 01L01L2009 02L02L2009 02L03L2009 01L04L2009 04L05L2009

1%%7""&7000 57333.95 &573517000 57"&1.29

20%72&27000 "7931.90 12375397000 %70"2.25

#. 8ahore Stock Exchange


)a,ore $tock '/c,ange 0Auarantee1 )imite! is Bakistan;s secon! largest stock e/c,ange after t,e .arac,i $tock '/c,ange. t is locate! )a,ore7 Bakistan. )istor% of 8SE!" )a,ore $tock '/c,ange +as esta2lis,e! in *cto2er 19%0 an! is t,e secon! largest stock e/c,ange in t,e country +it, a market s,are of aroun! 12-1"Q in terms of !aily tra!e! 5olumes. )$' ,as 519 companies7 spanning 3% sectors of t,e economy7 t,at are liste! on t,e '/c,ange +it, total liste! capital of (s. 555."% 2illion ,a5ing market capitali<ation of aroun! (s. 3."4 trillion. )$' ,as 152 mem2ers of +,om &1 are corporate an! 54 are in!i5i!ual mem2ers.

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6cti5ities of )a,ore $tock '/c,ange 0)$'1 ,a5e increase! significantly in all operational areas since its inception. *5er t,e years7 )$' ,as successfully met 5arious c,allenges an! ,as no+ emerge!7 fully geare! an! positione! to aggressi5ely compete +it, its fello+ '/c,anges7 contri2uting to+ar!s t,e gro+t, of Capital Markets in Bakistan. T,e )$' +as t,e first stock e/c,ange in Bakistan to use t,e internet an! currently 50Q of its transactions are 5ia t,e internet. T,e )a,ore $tock '/c,ange ,as opene! 2ranc,es in t,e in!ustrial cities of -aisala2a! an! $ialkot for tra!ing. T,e $ialkot 2ranc, is referre! to as t,e >$ialkot Tra!ing -loor>. 8SE (ndex 8SE"#/! T,e )a,ore $tock '/c,ange T+enty -i5e company in!e/ also calculates t,e performance of stocks assuming t,at all rig,ts issues an! 2onus s,are issues only increase t,e liste! capital. n t,e case of 2onuses or rig,ts t,e prices of t,e s,ares are not a!8uste! as t,ey are in t,e case of t,e )$'T( . #o+e5er7 t,e )$'25 assumes t,at !i5i!en!s pai! out 2y a component company are not rein5este!. n summary7 in t,e )$'257 no price a!8ustments are ma!e +,en any component company issues cas, !i5i!en!s. T,e )a,ore $tock '/c,ange Total (eturn n!e/ calculates t,e performance of stocks assuming t,at all payouts are rein5este! in t,e in!e/ on t,e e/-!ate. T,e )$'T( assumes t,at if a component company issues 2onus s,ares or announces a rig,ts issue it +ill increase t,e liste! capital. 6!!itionally7 t,e )$'T( also assumes t,at all pay-outs 2y a component company are 100Q rein5este! in t,e in!e/. T,erefore7 t,e )$'T( is a!8uste! against suc, payouts announce! 2y any of in!e/ constituents on its e/-!ate allo+ing t,e in!e/ 5alue to remain compara2le o5er time. 8SE@s em.ershi& Structure Cor&orate em.ers Pu.lic 8imited Com&anies 3 " 5 " 4 % " 5 " 5 " 4 5 5 % 4 ,anks or their Su.sidiaries 3 3 3 3 3 3 3 3 (ndividual $otal em.ers 11& 11& 11& 11& 11& 11& 11& 11& 11& 11& 11& 11& 11& 11& 11& 11&

Aear

Private 8imited Com&anies 2" 2" 2" 2" 44 2" 22 24

2000 2001 2002 2003 2004 2005 200" 200%

Sialkot $rading Floor =S$F?!

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s one of t,e t+o 2ranc, offices of )a,ore $tock '/c,ange 0)$'1 in or!er e/pan! its 2oun!aries an! make ease of its access in ma8or cites of country. 6cting as a part of )$'7 $T- is going for+ar! !ay 2y !ay to ac,ie5e aims7 goals an! aspirations of its ancestor. t is locate! in t,e 2uil!ing of $ialkot C,am2er of Commerce 4 n!ustry in $ialkot. 6ll of t,e 2rokerage ,ouses +,et,er acti5e or nonnati5e at $T- are registere! ,ouses in )$' as +ell as t,ese ,ouses are go5erne! 2y $ecurity '/c,ange Commission of Bakistan 0$'CB1.

Facilities at Sialkot $rading Floor *nline Tra!ing Terminals 0TE$1. @ie+ *nly Terminals 0@*T1. Tec,nical $upport (egar!ing Tra!ing $ystem. )imite! #ar!+are $upport L Trou2le $,ooting. ?ltimate $upport an! 6ssistance of +e2 @*T 4 TE$ for Beople at t,eir locality.

*. (slama.ad Stock Exchange


slama2a! $tock '/c,ange is one of t,e t,ree stock e/c,anges of Bakistan an! is locate! in t,e capital of slama2a!. )istor%!"

T,e slama2a! $tock '/c,ange 0 $'1 +as incorporate! as a guarantee limite! Company on 25t, *cto2er7 19&9 in slama2a! Capital territory of Bakistan +it, t,e main o28ect of setting up of a tra!ing an! settlement infrastructure7 information system7 skille! resources7 accessi2ility an! a fair an! or!erly market place t,at ranks +it, t,e 2est in t,e +orl!. T,e purpose for esta2lis,ment of t,e stock e/c,ange in slama2a! +as to cater to t,e nee!s of less !e5elope! areas of t,e nort,ern part of Bakistan. T,e $' To+ers comprise t+in 22 storey to+ers +it, uni:ue an! inspiring amenities7 offer futuristically an! aest,etically !esigne! offices +it, panoramic 5ie+s7 is 2eing constructe! o5er a piece of lan! measuring 5"00 s:uare yar!s in t,e ,eart of slama2a! at Jinna, 65enue 0=lue 6rea1 +,ic, is t,e ,u2 of all 2usiness an! commercial acti5ities in slama2a!. T,e 2uil!ing is facing 400 feet +i!e Jinna, 65enue on one si!e an! ,as anot,er entrance from 100 feet +i!e 3a<imu!!in (oa!7 2esi!es 2reat,taking scenic 5ie+ of t,e Margalla #ills an! t,e city from t,e 2uil!ing.

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(slama.ad Stock Exchange ,uildingB 2egister Com&anies and

em.ers!"

6t present t,ere are 119 mem2ers out of +,ic, 93 are corporate 2o!ies inclu!ing commercial an! in5estment 2anks7 C- s an! 2rokerage ,ouses. T,e ot,er 2" Mem2ers are in!i5i!ual persons +,o are +ell e!ucate!7 enterprising an! progressi5e min!e!. T,e affairs of t,e '/c,ange are go5erne! 2y t,e =oar! of Cirectors. T,e =oar! of Cirectors consists of ten !irectors7 of +,ic, fi5e are electe! mem2er !irectors an! four are non-mem2er !irectors nominate! 2y t,e $'CB +,ile t,e managing !irector 2y 5irtue of ,is office is t,e tent, !irector of t,e =oar!. n or!er to protect t,e interest of t,e in5esting pu2lic7 an n5estors Brotection fun! ,as 2een esta2lis,e! 2y t,e '/c,ange. $ince t,e inception of automate! tra!ing system 0 $'CT$17 t,e tra!e 5olume ,as 2een multiplying !ay 2y !ay an! t,e a5erage !aily turno5er ,as no+ crosse! t,e figure of 1 million s,ares. 3o+ all t,e liste! securities are tra!e! t,roug, t,e $'CT$. T,e system of p,ysical ,an!ling of s,ares an! securities ,as 2een p,ase! out an! ma8ority of t,e scripIs are settle! t,roug, Central Cepository Company of Bakistan )imite!. 6t t,e moment t,ere are 241 companiesLsecurities liste! on t,e '/c,ange +it, an aggregate capital of (s. 3&9.512 2illion. T,e market capitali<ation stoo! at (s. 272%5.00 2illion as on 04-04200% . T,e pace of listing ,as remaine! slo+ as t,e economy of t,e Country is un!er consistent pressure !ue to internal as +ell as e/ternal factors. n comparison +it, ma8or financial markets aroun! t,e Eorl!7 t,e functioning of capital market in Bakistan is still 5ery muc, in its infancy an! lacks a!5ance! tec,nology.

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(eferences9 nternet Brint me!ia 'lectronic me!ia