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to Islamabad Stock Exchange

Prosperity Through Transparent Market

Topics to be discussed

1 2 3 4
5

History of Stock Exchanges

Functions of Stock Exchange

Basic Concepts

Regulatory Structure & Governing Laws

Operational & Trading Activities

Stock Exchanges History

11th Century

1602

In France, courtiers de change (first Brokers) traded in debt and government securities

Till 1600

Amsterdam Stock Exchange (first Stock exchange) was created and it began official trading shares of Dutch East India Company

13th Century

Unofficial share markets existed across Europe where brokers would meet outside or in coffee houses to make trades

In Bruges (Belgium) commodity traders gathered in house of Van der Burse. That meeting was called Bruges Bourse. That idea spread in neighboring countries and bourses were formed in various places

Stock Exchanges History

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Europe & Others

By early 1700s there were fully operational stock exchanges in France and England. America followed in the later part of the century by signing Buttonwood Agreement. Other parts of the world followed later in 19th century. There are now a large number of stock exchanges in the world.

Sub-continent of India
Before Independence there were many stock exchanges established in sub-continent during 1800s. In 1934 Lahore Stock Exchange was formed but it was closed after partition and later on merged with Delhi Stock Exchange. Karachi Stock exchange was founded in 1947.

Functions of Stock Exchanges

Raising Capital for business
Mobilizing saving for investment Facilitating company growth

Barometer of the economy vetting companies Redistribution of wealth

Bought & sold

Corporate governance

Efficiently & fairly

Creating investment opportunities for small investors

Stock Exchange & Economy

Expansion / New Project

Tax Contributions

Money circulation

Attracts Foreign Investment

Employment Generation

Sensitivity of Stock Market

Demand & Supply

Economy & Politics

Earnings of Companies

Stock Market

Emotions

Rumors

News

Investor Vs. Speculators

Those who investors knows the company or at least the industry and were often involves the growth. Investors have reasonable ways to quantify risk.
There has been another type of investor. The investor does not have a deep knowledge about the company or industry he invests in. He invests based on trends, or charts, or tips, or generally guesses about the Market.

Basic Concepts
Ex-Dividend Dates: When a company declares a dividend, it sets a record date when you must be on the company's books as a shareholder to receive the dividend. Earning per share (EPS): A profitability indicator calculated by dividing the net after-tax earnings (earnings available to common shareholders) during a period by the average number of shares outstanding at the end of that period.

Stop-Loss Order: An order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor's loss on a security position. Also known as a "stop order" or "stop-market order".

Bull & Bear Blue Chip Carry-Over Trades Dividends Right Issue Book closure Buy Stop Order Inside trading Portfolio Public Limited Company Short selling

Regulatory Structure
Parliament

Ministry of Finance

State Bank of Pakistan

Securities & Exchange Commission of Pakistan

Federal Board of Revenue

ISE
CDC NCCPL

Governing Laws
The Securities and Exchange Commission of Pakistan (SECP) is the main regulator of the stock market. It regulates the stock market through following major statutory laws/rules:
Securities and Exchange Ordinance 1969 Securities and Exchange Rules 1971 Securities and Exchange Commission of Pakistan Act 1997 Specific Purpose Legislations for Conduct of Trade

Stock Exchanges Regulations: Memorandum & Articles of Association Listing Regulations General Regulations

Brief History of ISE

2009

ISE Towers were inaugurated in 2009 Logo of ISE was redesigned in 2009

2006 ~ 2007

UTS was established with LSE in 2007 T+2 cycle was introduced in 2007 UIN system was established in 2006 New RMS was introduced in 2006

2002 ~ 2003

Remote Trading was implemented in 2003

System Audit of Brokers was introduced in 2003 ULTRA TRADE trading system was adopted in 2002 ISE 10 Index was launched in 2002 Computerized Trading called ISE-CTS started in 1997 ISE Network Index was launched in 1996

1996 ~ 1997

Corporate Structure of the Stock Exchanges

The affairs of the Exchanges are run by the Board of Directors. Composition of the Board: Elected from Members of the Exchange Nominated by SECP The Managing Director Total

5 4 1 10

Managing Director is a member of the Board by virtue of his office. The Chairman of the Board is elected out of the non-member directors.

Organizational Structure

CEO Managing Director

GM (Operations)
Department of Companies
Affairs

Company Secretary
Department
of

Department of Internal Control

Department of
General Administration/ Finance

Department
of

Investors Relations

New Building

IT Wing

Stakeholders of ISE
Issuers Members
ISE has 119 Members/ Brokers 26 individual 93 corporate
Pakistani Citizen Having certain taxable income Graduate Not defaulter of any public institution Not penalized for any moral guilt Membership Fee

Customers of ISE

261 Companies are listed in ISE Rs. 200 million paid-up capital public offer should be Rs.100 million or 20% of the capital whichever is higher 500 applicants

Investors
ISE has a very small base of investors as compare to other Exchanges

Operations of ISE
Provide listings to Companies
Companies Provide quotations to media Affairs Ensure listing requirements and code of
corporate governance by companies Monitor listed companies

Grant membership to brokers

Internal Control
Control members Monitor computerized trading Perform market surveillance Manage Risk Management System

Provide Information to Investors

Investors Relations
Deal with Complaints of Investors Educate Investors Handle Default & Legal Cases Keep Media Relations

Trading Systems
The stock exchanges have fully computerized trading systems and out-cry systems no more exist. Bids (buy orders) and offers (sale orders) are placed in the trading software and then executed accordingly.
Types of Trading: Regular Future Trade Orders: Market Order Limit Order

Custodial Functions
Central Depository Company of Pakistan Limited (CDC) provides custodial services for shares. It ensures efficient handling and transfer of shares. Types of CDC Accounts:

Main Account for Brokers ( a gateway account) House Account (a family account of the Broker) Sub-Account (An investor account with CDC through Broker)
Investor Account Services. (Facilitating the Investors to open their independent CDC Accounts) Initial Account Opening Fee: Rs.500/-. Annual renewal Fee Rs.500/-.

Activity Chart
Buying Investor Broker NCCPL
Amount

Selling Investor Broker

Broker Shares Buying Investor Shares

Shares
Broker

Proceeds
Selling Investor Proceeds

SECP

NCCPL

CDC

Trading Server @ ISE Order matching/execution

Connected to Server through Network or Internet

Trader at Member Office Placing buy/sell orders in TWS for its clients

Trader at Member Office Placing buy/sell orders in TWS for its clients

Investor Terminal provided by Member. Placing orders directly.

Investor Terminal provided by Member.

Procedure for Trading in ISE

Step 3
Delivery

Step 2
Placing Orders

Clearing & Settlement

Step 1

Commission/Brokerage Fee Selecting Stock Broker

Opening Account with Stock-Broker

Stock Market Index

KSE-100 INDEX LSE-25 INDEX ISE-10 INDEX ISE-10 INDEX: Date of launching: Jan 1, 2004
The main objective for the construction of an index is to track the performance of the various listed stocks according to their market capitalization. A capital weighted index is composed of a basket of securities, which captures the change in market capitalization due to the variation in prices. Mathematically this can be represented by: Index Value = Total market capitalization * 1000 Index divisor

Trading Fees and Levies

% of Traded Value
Exchange Transaction Fee Appropriation:
SECP levy Investor Protection Fund Members Protection Fund
ISE Income

.00415

.00065 .00100 .00100

.00150

Sources of Revenue of ISE

Listing Fees
Initial listing fee @.1% of total paid-up capital maximum upto Rs.1.00 million Annual Listing Fee Paid-up Capital
Upto Rs. 50 mn Above Rs. 50 mn to Rs. 200 mn Above Rs. 200 mn Rs. 10,000/- P.A. Rs. 15,000/- P.A. Rs. 25,000/- P.A.

Additional Listing Fee @ 0.1% of the increased capital Trading Fee @ 0.0015% - Rs.1.50 per Rs.100,000 value of transaction Any Other Income Source

Assessing Securities

Economic Factors

Technical Indicators

Industrial Sectors

Fundamental Technical Analysis Analysis

Graphs

Companies Analysis

Charts

Word of Advice
1. Understand the nature of Stock Investment before making any investment decision. 2. Always Invest Through a Registered Broker of the exchange. 3. Diversify your investment to a possible extent. 4. Keep Complete record of your Investments. 5. Maintain your own CDC account for the safe custody of your shares. 6. The key to making money in stocks is not to get scared out of them.

Quotes by Market Gurus

Warren Buffett
Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years

John Templeton
Diversify your investments.

Warren Buffett
Wide diversification is only required when investors do not understand what they are doing.

Market Summary Report