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Internship Report
On Islamabad Stock Exchange

By

HAMMAD HAIDER SYED

A report submitted to the Department Of Administrative sciences, Quaid-i-A am !niversit"

September 2005

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A#$no%!e&"ement
Starting ,ith the name of Almight" Allah ,ho is the most gracious and merciful.hat ever I am toda" is because of parents and famil", especiall" I am thank full to m" ba/i and m" brother and m" friends ,ho helped me ever" time I needed themI am also thankful to m" department0s management, m" supervisor *adam 1asit *- %a""ab ,ho guided me to do internship and ,rite report- I am thankful to Sir Dr(hulam Shabbier )ia i ,ho helped me ever" time I needed2 this internship chance ,as given to me b" himI am grateful to *r- &ousaf '- *ukhdum Secretar" Islamabad Stock Exchange for his proper guidance despite his engagement in office- I am thankful *r- )oman , *rSa3ib 4alil *alik, *r- .aris +han )ai i, *r- Asghar Abbas )a3vi, *r- +amran An,ar and all staff for deepful consideration to,ards me during m" internship-

Hammad Haider Syed

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Exe#utive summ'ry
I ,as given a chance to ,ork ,ith management of Islamabad Stock Exchange b" the Department of Administration Sciences of Quaid-i-A am !niversit", as it is compulsor" to do internship in business organi ation and ,rite a report about ,hat have "ou learned in the organi ation that ho, the" are managing their business organi ation and ,hat are their ,eakness and ho, the" can over come them- *" internship remained ,ith the management of Stock Exchange- I /oined Islamabad Stock Exchange on 4ul" 6, 5778- During m" internship I ,orked in follo,ing Departments, I ,orked in Department of 9ompan" Affairs of Islamabad Stock Exchange for one and half ,eek- I also studied various regulations made b" Stock Exchange and securit" and exchange commission of #akistan to ensure that stock market remains transparent and mone" of investors is safe guarded- Anal" ed that companies are ,orking according to the rules and noted an" deviations- I also ,orked on code of corporate governance and listing and delisting regulation of Islamabad Stock Exchange- I had a chance to anal" e the reports of various listed companies and had exposure to various industries- I also had a chance to stud" listing of united bank limited-

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I also spend fe, da"s in brokerage house to understand ,hat investment opportunities the" are giving to their clients and ho, the transactions are made ,hat speculations are going in stock market and ho, these speculations and events can be anal" ed to earn mone" in stock market b" trading of shares- .hat precautions must be taken;

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I ,orked in the Department of investor0s relations ,hich is responsible to look after complaints of investors and resolve various issues bet,een brokers and investors- %his Department is also responsible for guiding people ho, to invest in stock change and various functions- I also gave presentation to people in information session of Stock Exchange- %elling people trends in market and ,here to invest-

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I ,orked t,o ,eeks in Department of finance ,here I had chance to anal" e past financial statements of Islamabad Stock Exchange -there I learned ho, various records are kept the" included entr" to ledger and bank reconciliations- I also learned the sources of revenue and its expenses- as the current building of ISE is not able to meet re3uirements so it constructing t,o to,ers of 56 stories so I had chance to ,ork on the feasibilit" of that pro/ect -this ,as confidential information not to be published-

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I also ,orked on the clearing house- %he functions of clearing ,ere assessed and ,ork for different activities performed-

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I ,orked in the Department of compan" affairs and learned ho, s"stem audit is done- =earned about exposure fees and studied ho, brokers are fined and chosen for audit- I studied audit report of lasani securities

Intro&u#tion
(urpose 'n& #ontents o) report
%he internship report comprises a brief stud" on Islamabad Stock Exchange >ISE? during t,o months internship- %he report is distributed in man" parts according to nature and re3uirement of organi ation and according to the instructions of supervisor of report-

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It depicts various things ,hich I have learned about the organi ation the techni3ues ,hich the" are using to regulate corporate sector and maximi e their revenues %he purpose of stud" is to develop skills through learning various aspects of organi ation- %he stud" enables to get command on bookish kno,ledge through practical approach and to understand the difference in both approaches- %his thing increases the kno,ledge and brings betterment in ,orking ,ithin organi ational environment- It includes practical experiences through ,hich I have gone through the report- It is good source of kno,ledge for those ,ho ,ant to kno, about Stock Exchange-

Scope of internship
* S#ope o) stu&y .orking in ISE ,as uni3ue experience, since I had exposure to stud" results of various listed companies and regulations the" are bound to follo,- It also give me confidence to invest in future in Stock Exchange- Since results are more attractive then other investments%he ISE management and especiall" internship in charge *r- .aris )ia i has a preplanned program ,hich is oriented to enable internees to understand to management of Stock Exchange and there given pro/ects as ,ell according to there abilities and there ,orking is continuousl" anal" ed- %here attendance record is kept and the" are asked 3uestion to kno, ,hether the" are learning or notSince ISE is e3uit" market and deals ,ith exchange of companies0 shares ,hich are listed on Stock Exchange thus I had exposure to stud" financial aspects of ISE-

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Di))i#u!ties 'n& !imit'tions o) stu&y: %he students have maximum time to do internship of @ ,eeks ,hich in ver" less

to understand functions of ISE thus the time ,as limited to understand all aspects of ISE0s functions but I have tried b" best to learn ever" thing ,hich I had exposureSecondl" compan" has confidential information ,hich can not be exposed, since it can give rice to speculations ,hich has a great impact on ,orking on Stock ExchangeEspeciall" the information of ISE cash flo,s generated b" ne, buildings and future pro/ections of financial statement ,ere confidential-

Metho&o!o"y o) rese'r#h %he methodolog" of research consists of all methods, ,hich ,ere possible during

the internship in ISE- %he follo,ing method ,ere adopted b" me,

Intervie%s: %he intervie,s ,ere made on dail" basis form the concerning Departments in ISE- %here are number of personas covered in intervie,s both top and lo,er management- %he intervie,s ,ere made in the form of prepared and unprepared- 1efore the intervie, general discussion ,ere made for creating feasible environment-

,uestionn'ire In prepared intervie,s the 3uestions ,ere asked consist on follo,ing nature, IIIOpen ended 3uestions9losed 3uestions-

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III-

#ositive and )egative 3uestions-

-pen En&e& ,uestionsB %he open 3uestions ,ere asked more as compared to other t"pes of 3uestions- %he open ended 3uestions asked in different directions- %he 3uestions ,ere asked more in number to top management ,hen the response ,as given than an open discussion ,ere made-

.!ose& En&e& ,uestionsB 9losed-ended 3uestions ,ere less in numbers as compared to other 3uestions asked b" me- %he 3uestioner ,ere first developed and than asked to the management- in the form of scaling-

/e#hni0ues in ,uestions: %he methods of 3uestions in open-ended techni3ue ,ere change 3uestion to 3uestion- In unprepared method the 3uestions ,ere asked according to information that I got from the respondent- 1ut in open-ended 3uestions ,ere asked usuall" positive provided if the response ,as expected according to desire- If there ,as chance variation in 3uestions than the 3uestions ,ere asked positivel" and than negativel" after time consecutivel"-

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Sour#es o) &'t' %he data used to prepare report and understand ,orking of ISE includes ISE

,ebsite, ,here a lot of information regarding rules made b" SE9# and made b" ISE are given, the must be understood to have idea about investment in ISE, these rules are made to make ,orking of ISE transparent and protect investors rights.ebsite also gives current up date of prices of shares ,hich facilitates sealing and ba"ing of shares electronicall" ever" ,hereA part from site, ne,spaper articles also provides current up date about securit" market and other issues- Darious %-D- and ne,s programs are also source of good kno,ledgeA part from these one can get information from ISE0 Department of investors relations and this Department help investors to resolve there problems and have information of shares investments- It gives them precautions- %he premiers issued b" ISE are also a great source of kno,ledge in simple ,a"-

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.ontents o) report
%he internship includes ,orking in follo,ing Departments and m" personal experiences ,hich I encountered ,hile ,orking in Islamabad Stock Exchange%he scheme of report is as follo,B

.'pit'! 'n& money m'r$ets

%his chapter describes ,hat are capital and mone" markets, various issues in

these markets- 'o, the" are good source of investments for investors and ho, these markets represent financial health of countr".hat t"pe of securities is traded in these markets and ,hat are there characteristics- 'o, these securities are valued-

Sto#$ Ex#h'n"es in ('$ist'n

It includes description of Stock Exchanges in #akistan- %here particulars such as

number of companies listed on them, "ear of establishment, number of members and location-

History o) Is!'m'b'& Sto#$ Ex#h'n"e

It includes histor" of ISE ,hen it ,as formed, ,here it ,as located, ho, man"

companies ,ere listed on it and ,hen trading started on it-

Stru#ture o) Is!'m'b'& Sto#$ Ex#h'n"e

It includes information about governing board of directors, emplo"ees ,orking in

ISE and their responsibilities- Its organi ation chart, regulator" authorit" under ,hich it ,orks its bankers, auditors and committees-

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(er)orm'n#e o) ISE 'n& its imp'#t on e#onomy

%his chapter includes information about performance of ISE ,hich is reflected in

financial statements of ISE such as, balance sheet, cash flo, statement and income statement- Darious trends ,ere anal" ed and the overall economies impact on corporate sector ,as anal" ed-

Dep'rtments o) Is!'m'b'& Sto#$ Ex#h'n"e

In this chapter the ,orking of various Departments of Stock Exchange is

discussed- %hese includeB i? Finance Department ii? Department of companies affair iii? Department of investor relation iv? Department of internal audit v? $ecord room

A#hievements o) Is!'m'b'& Sto#$ Ex#h'n"e

%he various achievements include in it-

5uture prospe#tive o) Is!'m'b'& Sto#$ Ex#h'n"e

%he chapter contains the vie,s about the future determination b" ISE

management and authorities related to it-

(erson'! experien#es
%his chapter is description of m" personal experiences ,hich I came through

during m" internship in ISE-

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S7-/ An'!ysis
%his chapter includes strengths ,eaknesses, opportunities and threats anal"sis of

Islamabad Stock Exchange-

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Su""estion 'n& re#ommen&'tions

%he suggestions and recommendation are ,ritten in the report ,ith detail ho, to

implement- %he timing ,here these suggestions and recommendation ,ill suitable is also stated in the report-

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.on#!usions
%he report contains a brief conclusion about the Islamabad Stock Exchange >ISE?-

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St'tement o) -b8e#tives
9ision St'tement %o be the pre-eminent Stock *arket in #akistan and achieve market recognition both in terms of 3ualit" and deliver" of our services-

Mission St'tement %o create value for our Investors and =isted 9ompanies through d"namic market operations, fair and transparent business practices and effective management-

.ore 9'!ues 7e 'im to be 'n or"'ni:'tion th't is )oun&e& on: 'ighest standards of commercial honour and integrit" 4ust and e3uitable principles of trade and business 7e sh'!! %or$ to: $egulate our market in accordance ,ith international best practices Settle and decide points of dispute arising out of investors0 complaints 7e h've #on)i&en#e in our 'bi!ity to: =ead through the strengths of our commitments and ,illingness to excel 9ontinuousl" respond to the changing needs of internal and external environments-

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.'pit'! 'n& money m'r$ets

5in'n#i'! system
In econom" several t"pes of individuals or entities generate and spend mone"%he" are called economic units- %he main t"pes of economic units include governments, businesses and households- Some economic units generate more income then the" spend and have funds left over- %hese are called surplus economic units the other economic units generate less income then the" spend and need to ac3uire additional funds in order to sustain their operations these are called deficit economic units%he purpose of financial s"stem is to bring the t,o groups surplus economic units and deficit economic units together for there mutual benefit%he li3uidit" function of the financial s"stems is ho, it allo,s the funds to move from one unit to another, funds are exchanged for financial products called securities-

Se#urities
Securities are documents that present right to receive funds in the future- %he person or organi ation that holds a securit" is called a bearer- A securit" certifies that the bearer has a claim to future funds- .hen the date of pa"ment occurs, ,e sa" the securit" maturesSecurities have value because the bearer has the right to be paid the amount specified- So the bearer ,ho ,anted some mone" right a,a" could sell the securit" to some one else for cash- Of course, the ne, bearer could sell the securit" to some one else too, and so on do,n the line- .hen a securit" is sold to some one else, the securit" is being traded-

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1usiness firms as ,ell as local, state, and national governments, sell securities to the public to raise mone"- After the initial sale, investors ma" sell the securities to other investors- As "ou might suspect, this can get to be a complicated business- %hat0s ,h" organi ations called financial intermediaries exist to help the initial sellers and markets are available for the subse3uent traders to execute their transactions-

5in'n#i'! Interme&i'ries
Financial intermediaries act as the grease that enables the machiner" of the financial s"stem to ,ork smoothl"- %he" speciali e in certain services that ,ould be difficult for individual participants to perform, such as matching bu"ers and sellers of securities- %hree t"pes of financial intermediaries are investment bankers, brokers and dealers-

Investment B'n$ers Institutions called investment banking firms exist to help businesses and state and local governments sell their securities to the publicInvestment bankers arrange securities sales on either an under,riting basis or a best efforts basis- %he term under,riting refers to the process b" ,hich an investment banker purchases all the ne, securities from the issuing compan" and then resells them to the public%o alleviate this risk, investment bankers sometimes sell securities on a best efforts basis- %his means the investment banker ,ill tr" its best to sell the securities for

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the desired price, but there are no guaranties- If the securities must be sold for a lo,er price, the issuer collects less mone"-

Bro$ers 1rokers often account representatives for an investment banking firm handle orders to bu" or sell securities- 1rokers are agents ,ho ,ork on behalf of an investor.hen investors call ,ith an order, brokers ,ork on their behalf to find someone to take over other side of the proposed trade- If the investors ,ant to bu", brokers find sellers- If investors ,ant to sell brokers find bu"ers- 1rokers are compensated for their services ,hen the person ,hom the" present the investor a commission on the sale and purchase of securities-

De'!ers Dealers make their living bu"ing securities and reselling them to others- %he" operate /ust like car dealers ,ho bu" car from manufacturer for resale to others- Dealers make mone" b" bu"ing securities for one price, called the bid price, and selling them for a higher price called ask price or offer price- %he difference bet,een the bid price and ask price represents dealer fee-

5in'n#i'! m'r$ets
Financial markets are categori ed according to the characteristics of participants are and the securities involved- Follo,ing are the t"pes of marketsB

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/he prim'ry m'r$et .hen a securit" is created and sold for the first time in market place, this transaction takes place in the primar" market-

/he se#on&'ry m'r$et Once a securit" has been issued, it ma" be traded from one investor to the other%he secondar" market is ,here previousl" issued securities or used securities are traded among investors- Secondar" market transactions occur thousands of times dail" as investors trade securities among themselves-

/he money m'r$ets Short term securities having maturit" of one "ear or less are traded in mone" markets- %he" use phones and computers to make trades rapidl" among themselves and ,ith the issuing organi ations-

/he #'pit'! m'r$ets =ong term securities having maturities over one "ear are traded in capital market%he firms usuall" invest proceeds from capital market securities sales in long term assets like buildings, production e3uipment and so on- %he most ,idel" recogni ed securities in the capital market bonds and stocks-

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Se#urity ex#h'n"es
Organi ations that facilitate the trading of stocks and bonds among investors are called securit" exchanges- 9orporations list their securities on exchanges because the" believe that having their securities traded at such a location ,ill make it eas" to trade and therefore to raise priceEach exchange listed stock is traded at a specified location on the trading floor called the post -trading is supervised b" specialists ,ho act either as broker and dealers-

/he over the #ounter m'r$et

In contrast to organi ed exchanges, ,hich have ph"sical locations, the over the counter market has no fixed location or it is ever" ,here- %he over the counter market or O%9 is a net,ork of dealers around the ,orld ,ho maintain the inventor" of securities for sale-

M'r$et e))i#ien#y
%he term market efficienc" refers to the ease, speed and cost of trading securitiesIn an efficient market securities can be traded easil", 3uickl" and at lo, cost- *arkets lacking these 3ualities are considered as in efficient*a/or stock markets are generall" efficient because stock holders can trade millions of ,orth shares in fe, seconds b" making a phone call and pa"ing small commission- %he real estate market is more in efficient as compared to stock market because of dela" in transaction and more commission%he more efficient the market, the easier it is to shift mone" from surplus economic units to deficit economic units-

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Se#urities in sto#$ m'r$et

Follo,ing securities are usuall" traded in market Bon&s 1onds are a source of financing and the" are certificates that provide proof of loan given b" investors- %he" have maturit" date on ,hich loan is given back and some intrest is also paid on bondsSto#$s A t"pe of capital stock that possesses the basic rights of o,nership, including the right to vote- $epresents the residual element of o,nership in corporation%here are t,o t"pes of stockB 9ommon stock #referred stock

-vervie% o) the e#onomy

%he strong-macro economic fundamentals of the countr" continued to lead the gro,th in our econom" during 577<-76- On the basis of ver" strong (D# gro,th, the "ear ,itnessed an over all improvement in almost all the sectors of the econom"- %he industrial production particularl" the large scale manufacturing sho,ed ver" strong gro,th that also led to a sharp rise in the exports of goods and services- A notable decline in the public and external debt burden, pre-pa"ment of high cost external debt, and a successful return to the international capital market through the flotation of a Eurobond

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,ere the hallmarks of this "ear- %he direction of interest rate and inflation also remained do,n,ard thereb" boosting the pace of economic development- (ood governance, diligent fiscal management, and steps to boost investor confidence contributed largel" to this significant performance- .ide-ranging structural reforms, prudent macroeconomic policies, financial discipline and consistent policies transformed #akistan into stable and resurgent econom" in 577<-76;ey Sto#$ M'r$et D't' <r'phi#'! 9ie%
4000 (share in million) 3000 2000 1000 0 97-98 98-99 99-00 00-01 Years 01--02 02--03 03--04

Total Turnover of Shares

15 (share in million) 10 5 0

Annual Daily Turnover of Shares

97-98 98-99 99-00 00-01 01--02 02--03 03--04 Years

300 pai up !apital (share in million) 200 100 0

Total "iste pai up !apital

97-98 98-99 99-00 00-01 01--02 02--03 03--04 Years

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Total Market a!itali"ation 1200 1000 (Rs. in billion) 800 600 400 200 0 97-98 98-99 99-00 00-01 01--02 02--03 03--04 Years

Sto#$ M'r$et (er)orm'n#e

Side b" side the robust performance of our econom", the securities market of the countr" also performed exceedingl" ,ell during the "ear- Except for the concluding da"s of the fiscal "ear ,hen the market faced some pressure as a conse3uence of imposition of transactions recorded ne, highs- =ike the other leading indexes of the countr", the ISE)et,ork Index also sho,ed an increase of 68G during this term- Starting the "ear at a level of @,5:7-:<, the index rose to ::,@E6-<E at the end of 4une 5776- 'o,ever during the "ear, the volume of shares traded at ISE suffered a sharp decline despite the fact that the volume of trading at the other exchanges exhibited a stunning gro,th- %he average dail" traded volume at the ISE remained 8-:C million shares ,hich ,as <EG less as compared to the last "ear- In an order driven market, the business of exchange entirel" depends on the number of the trades and the 3uantum of the trading volume executed through its trading platform- Despite best efforts to encourage the members to trade at ISE platform, a continuous shift of trade volume to more li3uid market ,as seen- 1eing poised of this fact, the exchange endeavored to encourage more and more members to activate their houses as presentl" less than 67G of the total strength of the members are in business at the ISE- 'o,ever the efforts of the exchange could not bear fruit ,ith the

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result that ,hereas the volume of traders at the other markets surged, the ISE trading volume declined sharpl" during the "ear-

5in'n#i'! Hi"h!i"hts
During the "ear under revie,, the Exchange earned record revenue of $s-6A-C< *illion, surpassing the income figures of the last "ear b" 5:G after restatement for the purpose of facilitating comparison- %his hike on the revenue side can mainl" be attributed to a modest increase in the annual listing fee structure besides handsome gain in the trading fee income of the Exchange during the "ear- 1oth of these resources sho,ed respective increases of :<8G and ECG as compared to the last "ear- %he profit earned on bank deposits also surged b" E:G over the "ear- On the other hand the expenditure of the Exchange sho,ed a slight increase of 6-@G primaril" due to the provisions for ,riting off the receivables of long outstanding listing fees on account of irrecoverable or doubtful recover"- During the "ear under revie,, the Exchange also recorded the highest ever surplus of $s-E-<E million in its short financial histor"- %he salient highlight of the income and expenditure account of the Exchange during the last six "ears is given hereunderB >$upees?
A##ount In#ome Expen&iture Surp!us/?De)i#it@ ? ? ? ? ? 64>66 :7,55A,EEE E,@56,556 ><<,<:E,55@ 66>00 :7,C88,CC6 E,@8C,5<E ><5,<85,6:< 00>0* :6,C58,:6< :<,58A,E<A ><7,E8C,@<5 0*>02 6:,7A6,6C@ :A,E8E,7@7 >E,@67,<<C 02>0+ <@,8EC,:<A 5C,A66,ECC >8,@7@,<C7 0+>01 6A,C5A,58: 5@,EC:,@E6 E,<E6,CA8

;ey 5in'n#i'! .h'rts )or ='st Seven Ye'rs

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#0 40 (Rs. in million) 30 20 10 0

#n!o$ e vs %&pen iture

in ome e$!en%it&re

97-98 98-99 99-00 00-01 01--02 02--03 03--04 Years

300

'ro( th of assets

assets (Rs. in million)

200

100

0 97-98 98-99 99-00 00-01 01--02 02--03 03--04 'ears

On the balance sheet side, a gigantic rise of :75G ,as ,itnessed on account of rise in the *embership Fund from $s-:57-68 million to $s-56<-5A million as a conse3uence of grant of ne, memberships during the "ear- Overall, the Exchange issued a total of :8 more membership cards during the "ear for the purpose of inducting ne, 3ualit" members to the Exchange- *ainl" due to that conse3uence, the footing of the balance sheet sho,ed an overall rise of ::5G as compared to the last "ear- %he balances in the *ember #rotection Fund and Investors #rotection Fund also increased b" 6:G and 8:G respectivel" from the last corresponding figures- 1oth of these funds have become full" funded from this "ear on,ard- Another distinctive feature of the financial

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performance of the Exchange has been that 5EG reduction in the account receivables ,as achieved during the "ear due to hectic efforts of the management-

-per'tion'! Revie%
From the operational point of vie,, the "ear under revie, ,as full of challenges%he exchange remained full" focused to intensif" the regulator" compliance on all spheres- A number of landmark achievements ,ere made in this term-

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Stock *arket Operations

Ris$ M'n'"ement $isk management is kno,n as the back bone for ever" Stock Exchange- %he

Exchange laid do,n great emphasis on this aspect- %he gro,ing process of the scrips had reduced the exposures of the members and there ,as a need to revie, the margin slabs rationall"- Accordingl", in order to encourage members to trade through ISE9%S, the Exchange revie,ed the exposure margin slabs up,ard after taking into account the associated potential risks- 'o,ever, the Exchange maintained the loss limit up to $S-:77,777H- ,hich is a most effective measure to control the risks- 1" the grace of Almight" Allah, no default occurred during the "earSo far the Exchange has been managing the risks through traditional measures b" retaining depositsHsecurities based on certain criteria and having a vigilant check over the positionsHconcentrations, ho,ever, the Exchange is activel" pursuing to adopt value at risk model in near future ,hich ,ill help in managing the /ob more s"stematicall" in line ,ith statistical principles-

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Survei!!'n#e 'n& Monitorin" %he Exchange being a S$O also endeavored to control the malpractice through

price and position monitoring of the participants- %he exchange also conducted investigations on certain issues- %he 1oard of the Exchange also tool cogni ance of t,o cases as reported as a conse3uence of surveillance and monitoring regarding market manipulations and short-selling etc and imposed fines and reprimanded such participants ,ho ,ere found involved in these cases-

En)or#ement 'n& System Au&it o) Bro$ers %he good governance is the core of success for ever" business- As a part of good

government, the brokers are supposed to abide b" the s"stems and norms devised for the trade and business in transparent manner- Deviations from the s"stems lead to failure of the venture- %he ISE is ,ell poised to pla" its due role as a front line regulator to enforce good governance at all tiers and echelons- %he ISE took a leading step to conduct the s"stem audits of the members and the program of s"stem audit b" the practicing charted accountant firms ,hich ,as initiated in late 5775%he exercise of s"stem audit of members has proved beneficial to both the members and the Exchange as ,ell- It enabled in recogni ing the ,eaknesses of the s"stem ,hich has led to an overall effort to remove the observed deficiencies- Of late, %he SE9# has also issued detailed regulations on the sub/ect ,hich have also been adopted b" the ISE- %he next phase of s"stem audit ,ould be conducted as per the regulations-

56

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

&

E!imin'tion o) .-/ 'n& A&option o) M'r"in 5in'n#in" A final roadmap has been chalked out to phase out the carr" over transactions

s"stem >badla? from the Stock Exchange in #akistan ,hereb" this s"stem ,ould b" eliminated b" 4une 5778- In order to replace the old s"stem, international model of margin trading shall be introduced b" the Exchange- For hedging needs, the use of derivative market shall be promoted- In this connection, the SE9# has allo,ed future trading in 5E scrips- It is hoped that this transition ,ould bring a health" change for sustainable development of the market-

=istin" Re"ime For the past fe, "ears, the gro,th of listed sector has sta"ed belo, par- %his "ear

seven companies applied for listing ,hereas last "ear onl" one ne, entit" ,as listed at the ISE- %his sluggish gro,th of the corporate sector is due to enforcement of strict securities la,s and monitoring measures besides the shift from e3uit" rising to cheap borro,ing through the mone" market- *oreover during the "ear, <8 companies ,ere delisted mostl" sue to mergers and bu" back of shares b" the sponsors%his "ear gigantic increase in the listed capital and market capitali ation occurred due to the listing of state o,ned companies b" ,as of privati ation- %he Exchange as ,ell as members pla"ed a ver" significant role for making the privati ation process of the (overnment successful and all such issues ,ere subscribed like hotcakes- %he increase in the paid-up capital and market capitali ation as compared to last "ear ,as :AG and E8G

58

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

respectivel"- As such the privati ation has helped in broadening the market base to a great extentFrom the enforcement aspect, the Exchange adopted proactive measures- %his "ear the 1oard of Directors of ISE also approved to establish a counter for the defaulting companies for ,hich the modus operandi is being set out- %he 1oard of Directors of the Exchange has also approved to make some amendments in the =isting $egulations of the ISE ,ith the ob/ective of strengthening the enforcement mechanism- %his amendment pertains to the statement of compliance to be reported in the annual reports of the companies that the compan" is not in default of an" provision of the =isting $egulations of the Exchange inclusive of the pa"ment of listing fee etc and in case of an" such scenario2 the compan" ,ould elaborate the reasons thereof- Efforts are on ,a" to develop a consensus on the issue amongst the Stock Exchanges in this regard so that the matter could be referred to the 9ommission for further needful actionIn order to encourage small and medium scale enterprises in the countr", regulations for O%9 market ,ere framed b" the Exchange- At the behest of the SE9#, it ,as decided in the 9oordination 9ommittee meeting that three Stock Exchanges shall establish a unified O%9 market- So far no progress could be achieved in this respect and no compan" could be listed at the O%9 market-

5A

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

300 no) of *o$ panies

Total no) of liste se!urities

200

100

0 97-98 98-99 99-00 00-01 01--02 02--03 03--04 'ears

ne( liste se!urities urin+ the year

8 no) of !o$ panies 6 4 2 0 97-98 98-99 99-00 00-01 01--02 02--03 03--04 'ears

" .h'n"e in /i#$et Si:e As part of the exercise to create li3uidit" and make the market more active, a change in tick ,as affected this "ear b" reducing the tick from paisa five to paisa one%his measure has been appreciated b" the participants and has helped to an extent in the enhancement of the trade activities-

5C

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

Sto#$ ex#h'n"es in ('$ist'n

%here are < stock exchanges ,orking in #akistan-

;'r'#hi Sto#$ Ex#h'n"e +arachi stock exchange is the biggest and the oldest stock market ,hich came in to existence on :@ September :E6@- On :7th mach :E6E it ,as given status of public guarant" limited- At that time the total members ,ere E7 onl" :8 members ,ere activeInitiall" :8 companies ,ere listed having paid up capital of <C million after the increase in corporate sector the number of listed companies increased- )o, +arachi Stock Exchange has AEE companies ,hose listed capital is <A7 billions and there market ,orth is :5777 billion- %he number of members of +arachi Stock Exchange is 577 out of ,hich onl" :8: ,ere active-

='hore Sto#$ Ex#h'n"e =ahore Stock Exchange is located in +hi"aban i Ai,an i I3bal- %his stock exchange came into existence on :EC7- %he number is listed companies is 8A:- %he number of members is :8: out of ,hich onl" @5 are active and providing service- %he =SE has 58 index in ,hich leading companies sho, the market activit"-

Is!'m'b'& Sto#$ Ex#h'n"e %he Islamabad stock exchange >(uarantee? =imited ,as incorporated on October 58, :E@E- %he exchange first time started trading in 4ul", :EE5- %here are ::7 members of Islamabad stock exchange, but onl" 67 of them are active- %he building of exchange is

5@

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

located in 1lue Area, Fa al Iul- 'a3 $oad Islamabad- %here are ::7 brokers in ISE- %he ISE has :7 index including companies ,hose shares traders more-

'istor" of Islamabad Stock Exchange%he Islamabad Stock Exchange >(uarantee? =imited ,as incorporated on October 58, :E@E, under the compan"0s ordinance :E@6 as a compan" limited b" guarantee- %he exchange first time started trading in 4ul", :EE5- %he main function of exchange is to conduct, regulate, trade securities, government bonds, shares of companies and other related investment- %here are ::7 members of Islamabad Stock Exchange, but onl" 67 of them are active%he building of exchange is located in 1lue Area, Fa al-ul-'a3 $oad, Islamabad%he building is called )afees #la a, ,hich has four stories, the building is ac3uired on rent basis under a contract and rent is paid on advance basis- %he ne, building is under process near the Saudi %o,er building, Islamabad- %he building ,ill be 56 stories, including all facilities in it- It is in form of t,o to,ers %he Islamabad Stock Exchange ,hich ,as established in :E@E ,ork under the Securities exchange commission ordinance >SE9#? :EAE, compan" ordinance :E@6, securities exchange rules :EC:- %he exchange has a memorandum and article of association, ,hich ,as approved b" SE9#- %he amendment cannot be made ,ithout prior approval of Securities and Exchange 9ommission of #akistan >SE9#?%here are three regulating bodies of Islamabad Stock Exchange >ISE?- First is the Securities and Exchange 9ommission of #akistan >SE9#? ,hich is responsible for maintaining regulations for securities and other matters related to companies- %he other

5E

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

regulating bod" is corporate la, authorit", ,hich has been merged in SE9#, is responsible for la, and order, ,hich is implemented for Stock Exchange- %he third bod", ,hich is the supreme, is the *inistr" of Finance ,ho sent instruction from time to time three exchanges including corporate la, authorit" and SE9#%here are 5<< companies listed in Islamabad Stock Exchange having $s- 5E<-:8 billion #aid-up capital- %he strength of emplo"ees is << in number- %here are @ officers including *-D- and secretar" of exchange in secretariat of ISE%he emplo"ees have different background of education ,ith different 3ualification from various fields- *ost numbers of emplo"ees are interred, graduate and masters- %he master degree holders are less in numbers- %he emplo"ees are professionals and kno, ho, to perform their duties%he timing of trading in Islamabad Stock Exchange Frida" is E-<7 A-*- to:5-77 #-*- and 5-<7 #-*- to 6-77 #-*-- )ormall" it is E-<7 A-*- to 5-<7 #-*, ,here the management timings are E-<77A-* to 8-77 #-*- %he exchange remains closed on Saturda" and Sunda" in a ,eekIn these da"s there are 5<< companies are listed in ISE- %here are no %F90s registered in ISE- %he preferred stock is onl" in one compan" name ,hich is called )et Over =easing =imited)o, ISE is thinking of proper human resource Department ,ith 3ualified human resource professionals to mJnage emplo"ees of ISE to have best out of them- #resentl" development of human resources is done b" on the /ob training, seminars, ,orkshops and emplo"ees are given chances to excel in their carrier- %he check and balance is maintained for each emplo"ee- 'igher emplo"ees use management b" ,alking around

<7

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

method >*1.A? for check and observe ever" emplo"ee- %he promotion is based on performance and 3ualification of emplo"ee, using re,ard management- %he other things are seen are the mental approach, experience and 3ualification of the emplo"ee%he companies var" from time to time in ISE due to delisting and in some companies the merger case ,ere existed- %he ne, companies are also listed from time to time- Although the share of ISE in stock markets of #akistan is ver" less as compared to other t,o markets, turnover of shares and li3uidit" of shares is less, but ISE has managed to overcome its accumulated losses and has a bright future- Its management is ,orking to improve more-

.hat is Stock Exchange;

%he Stock Exchange performs various functions simultaneousl" for the gro,th and development of econom"- It also depicts the econom" as an instrument and help to anal" e the economic condition of the countr"- .ithout strong position of Stock Exchanges the econom" cannot be predicted that it ,ill be health" in future%he Securities and Exchange ordinance :EAE state that K Stock Exchanges means an" person ,ho maintains or provides a market place or facilities for bringing together bu"ers and sellers of securities or for other,ise performing ,ith respect to securities the functions commonl" preformed b" a Stock Exchanges, as that term is generall" understood, and includes such market places and facilities-L In Stock Exchange the members meet to bu" and sale stock- %he principal of demand and suppl" is follo,ed for price determination the exchange is managed b" the board of directors consisting of certain members ,ho ma" be broker, odd lot dealers and

<:

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

specialists- %he boards of directors are responsible for making decisions and performing various functions %here are three Stock Exchanges ,orking in our countr" for the prosperit" of countr"- In ISE there are 5<< companies are listed, ,here in +SE there are AEE and =SE has 8A: companies-

Sto#$ Ex#h'n"es
Islamabad Stock Exchange>ISE? =ahore Stock Exchange>=SE? +arachi Stock Exchange>+SE?

.omp'nies
5<< 8A: AEE

%he past histor" of ISE for companies listings var" from time to time- %he Stock Exchange is a place ,here trading of shares takes place- %he management of Stock Exchange first observes the listing regulation for a compan" ,ith authori ed regulation.hen a compan" gets approval for listing in Stock Exchange, it offers the shares for sale to the general public through initial public offering >I#O?- %his means that the shares are first offered for sale to general public- .hen public accepts the offer the" purchase the shares from exchange and got o,nership right in compan"- %he future value of share is depending on the performance and repute of compan"- If the performance is good and demand is high, than the value of shares ,ill be appreciated- 9onversel" if performance is bad than the value of shares ,ill go do,n, it is because the insufficient demand for share ,ill occur in the market- %he investors can earn the profit on shares b" t,o ,a"s, first from the appreciation of shares, ,hich is also called capital gain, secondl" ,hen the" receive dividends on shares-

<5

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

9ommonl" used terms in Stock Exchanges

Sh're: It is certificate of o,nership in a compan" in ,hich the investor made the investment- %he shares are issued to the o,ner ,ho purchases the shares from the stock market- %he companies usuall" issue shares in lots of different si es- %he common lot in the market is 877-%hese shares are certificates ,hich present right of o,nership to shareholders and the" are in electronic form no, a da"s- #eople gain return b" investing in shares-

Bu!!ish /ren&: 1ullish trend is ,hen the prices of most of the compan"0s shares rise up- *arket usuall" goes to bull ,hen demand of shares is more than the suppl" of shares-

Be'rish /ren&: 1earish trend is reciprocal of bullish trend in ,hich the market falls do,n and the prices of ma/orit" of companies go do,n- In bear the suppl" of share is more than the demand of shares-

.'pit'! <'inIt is extra mone" gained b" an investor ,hen he sells shares purchased b" him%he capital gain occurs ,hen an investor sells shares at price more than the purchase

<<

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

price- %here are man" political, economical reasons and performance of compan" is another reason for having capital gain-

B'&!' or .'rry over /r'&e: It the form of trade in ,hich the individual or an" institution provides the loan on short term usuall" for one da"- %he 1adla rate is high than the market rate- %he variation in badla rates can negativel" or positivel" effect in market situation-

B!ue #hips: 1lue chips are those companies in ,hich the maximum trade is done in a da"- %he investors do maximum trade in these companies ,ith the expectation of maximum profit%he trading volume of these companies is high than other companies in the market- %he other thing is that blue chips companies are the best performer in the market- %he shares of such companies are easil" available- In these da"s #%9=, '!19O, #SO, #%9, O(D9= are the blue chips-

Divi&en&: It is distribution of income of a compan" to its share holder0s -%he decision of distributing income to shareholders is made b" board of directors of compan"- Dividend is source of return for investors, higher the dividends the higher ,ill be the prices of a compan"- #eople like to invest in shares of companies ,hose dividends are stable or sho,ing gro,th-

<6

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

-r&in'ry sh'res: It is the most common form of shares, and these shares are issued b" maximum companies- %he dividends depend on profitabilit" of the compan" and recommendations of board of directors are distributed to preferred shareholders and then the remaining profit is distributed in common stockholders- %he common stockholders have right to vote in elections of board of directors and to contribute in decision making process-

(re)erre& sh'res: In this t"pe of shares the profit is given to the shareholder at fixed rate- If the compan" earns more profit than the preferred shareholder cannot take extra profit, in the case of loss he feels comfort because the earning of share remains secure- In #akistan the preferred shares usuall" not issued because people don0t ,ant to invest in them-

Initi'! (ub!i# -))erin" ?I(-@: .hen a compan" first time launches its shares in the market to general public for sale is called initial public offering >I#O?-

(riv'te (!'#ement or Insi&e /r'&in":

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#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

In the t"pe of trading the purchase or sale is made b" a person ,ho has inside information about the compan" ,hich is not generall" available in the market- In #akistan such deal is illegal- %his makes stock market untrasparent-

=on" (osition: %he share is purchased ,ith intention that in future the price of shares ,ill go upAfter observing their suitable position he sale these shares in the market and earn profit-

Short (ositionB In this t"pe of trading the investor purchase the shares of the compan" ,ith intention that he ,ill sell them after some time ,hen the price of shares ,ill go up- After selling those shares he purchase again ,hen their price go do,n- %he earning is made time to time from such sale- %his t"pe of trading is called short position-

(ort)o!io: .hen the investor purchases the shares of different companies and different industries to reduce the risk from the market the ,hole collection is called portfolio-

.'pit'! <'in: %his is the appreciation on the price of shares, ,hich exist in future- .hen the shares are bought b" the investors after a some period the price of such share rise up due to excellent performance of compan" or an" other reason, the investor can earn profit b" selling it in the market this is called capital gain-

<A

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

9apital gain M *arket prices of shares - #rice at ,hich the shares ,ere purchased-

Investment .orpor'tion o) ('$ist'n ?I.(@: %he Investment 9orporation of #akistan is a bod", ,hich invest in different companies and make portfolio of it- On the behalf of such investment it issue units, ,hich are called I9# units- %hrough purchase of such units the investor relaxes due to less tension, it is because he is not involved in trading process- All issues regarding trading are dealt b" investing corporation-

Ri"ht Issue: .hen a compan" ,ants to issue more shares in the market, it is a choice for the compan" that it offers the shares first to existing shareholders- 1" using this option of right issue o,nership ,ill remain to existing shareholder and do not divided to other people- If the existing shareholder do not take interest in bu"ing ne, shares than after some da"s the right is transferred to general public-

Sett!ement: %here are t,o t"pes of settlements >a? %N: !nder %N: s"stem the transaction is made on spot ,ithin da">b? %N< In this s"stem the transaction is made first da" and clearance is made on third da"-

<C

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

/erm 5in'n#e .erti)i#'tes ?/5.s@: %he term finance certificates resembles to bonds, ,hich are issued b" companies for aim to generate the funds from general public- .hen the investors purchase %F9s the" receive interest from the companies-

Ho% to invest in Sto#$ Ex#h'n"e

%he investment in Stock Exchange is different from other sectors of econom".hen an individual commits for the investment, he first opens the account to the member of Stock Exchange or he must have his separate account in Stock Exchange- %here are three t"pes of members in Stock Exchange, individual members, at partnership and corporate members- %he members ,ho are currentl" investing in stock market are called active members2 it is not necessar" that all members should be active- It ,ill be best decision of the investor for the choice of best member on the basis of his repute, ,here he ,ants to open the account, is holding the office in Stock Exchange to avoid tension and losses in stock market- In case of office of broker is in other place instead of exchange building, investor should confirm from the Stock Exchange management or Securities and Exchange 9ommission >SE9#? about the existence of office- )o broker is allo,ed to operate ,ithout permission from SE9# and investor should report to ISE in case of violation of rules- After opening the account, an investor becomes the member of the brokerage house, in ,hich he opens his account- )o, management of ISE is taking steps to ensure that investors have separate account the annual fee charged for that account is :877- In these da"s the limit to open account in a brokerage house on the behalf of

<@

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

member is the $s- :7,777 at least- .hen the process of account opening is completed, the investor can ac3uire the shares from exchange b" placing order- %he shares are usuall" offered in lots, ,hich varies from compan" to compan"- !suall" lots of 877 are offered%he investor should him self anal" e future prospects of firm in ,hich he is investing to ensure that his investment is safe- %he risk and return are important factors that go side b" side, there are reciprocal to each other and balance should be maintained in them-

Ho% to minimi:e ris$ in investin" in Sto#$ Ex#h'n"e

Investor should a,are of compan", ,hich he ,ants to purchase the shares- 'e should be a,are of positive and negative aspects of compan"- 'e should be able to do formal anal"sis of financial statements at least he should have kno,ledge of economic environment- In Stock Exchange most of the investors prefer to invest in blue chips- It is because the" assume that through trading in blue chips, their investment ,ill be secured and the" can protect them from big losses- %he share price of blue chips remains stable or increases because these companies are stable- %here are some strategies to invest for maximum gain, :Investor should invest in different sectors and in different companies- %his ,ill reduce losses because of particular trends in particular market5%he market trend and policies of compan" should be anal" ed before the investment- %his involves predicting future and avoiding rumors<1efore the investment, it ,ill be better that the investor should check the reports of companies ,hether 3uarterl", semiannuall" or annuall"- Due to this, he can check ,hether the compan" follo,s the code of corporate governance or not; %he other

<E

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

advantage that he can observe the trend of profitabilit" of companies to,ards the future ,hether their financial position is sound or not; %hen he should make decision of investing in that compan"6%he other method is taking the long position- In this method the investor expect that the prices of shares ,ill go up as compared to no,- 1ut he should conscious the situation ,ith logic and complete information about the future trend of market- If he is not up to date he can suffer losses8*ost investors take short position for trading of shares in the market- %he short position is usuall" taken for one da"- It ,ill better for investor to take position after opening some time in market and observing high and lo, price in the specific da" at ,hich he is taking position in a specific da"- %his t"pe of investors usuall" doesn0t have mone" the" are also called gamblers- %he" pa" the difference ,hether it is loss or profitAIn all t"pe of investments trade off exists bet,een return and risk- %his is especiall" important in case of ISE ,here stock prices fluctuate and depends on so man" factors-

(re#'ution )or investor

%here are some precautions for the investor before making the investment in stock market and during the trading process- %hese are, :%o avoid from the rumors- %he investors should reconfirm the ne,s from the responsible authorities because speculations cause losses to investors-

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#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

5-

After giving the order for purchase or sale of shares to broker- %he investor should verif" that the order is placed ,ithout an" error- 'e should check si e of lots, name of compan", price ,hich he asked for such trade, date and the price at ,hich he ,ant to purchase or sale the shares-

<-

It is essential investor should get suret" about fairness of member for the trade purpose from Securities and Exchange 9ommission of #akistan >SE9#?- 'e should bu" shares from those brokers ,ho are registered in SE9# other ,ise the" ,ill suffer losses-

Ho% to m'ximi:e "'in usin" st'tisti#'! te#hni0ues

*ost of the investors in Islamabad Stock Exchange >ISE? do not a,are the statistical tools for maximum gain- %he" prefer market trend and the situation of the market of +arachi Stock Exchange >+SE?- After taking intervie,s the" ,ere unable to tell about the use of Statistics- %here are some instruments given belo, to get maximum gain from the market- %his information ,as given to me b" general manager of ISE-

Me'n:
*ean is simplest techni3ue to be use as a statistical instrument for investment in market- %he mean can be calculated from sum of values of shares divided b" number of "ears- %o anal" e the trend of a compan" shares for the purpose of investment in stock, mean of total market shares value for different periods divided b" number of time period in ,hich the investor is interested can be calculated-

6:

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

5ormu!': *ean M %otal values of share during different "ears %otal number of "ears

(eometric *ean >(-*-?B

It is defined as Kthe nth root of the product resulting from multipl"ing a series of return relatives together-L (eometric *ean >(-*-? is the other measure of the central tendenc"- It measures the compound rate of gro,th over different periods of time- It is often used in investments and finance to reflect the stead" gro,th rate of invested funds over some past period2 that is the uniform rate at ,hich mone" actuall" gre, over multiple periods-

5ormu!': (eometric *ean M (-*- M O>:N%$? >:N%$? ----------------- >:N%$?P :Hn - : .here %$ is abortive of total return, ,hich can be finding %$ M I N >#:-#?H#

IM Interest received during the period#M 1eginning price#:M Ending priceIn the case of shares %$ ,ill be %$M D N >#e-#o? H #o DM Dividend#oM 1egging price-

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#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

#:M Ending price-

Standard DeviationB
%he standard deviation is used to measure the data change ,ith each price or it is a tool to measure the deviation of data- %he shareholder can check the variation of prices in shares through it-

5ormu!':

S-D- M Q5

- O>Q? 5P n

9orrelationB
It is the measure of relationship in the data bet,een t,o variables- In Stock Exchange it is applicable ,hen the shareholder holds the shares of t,o companies or more and he ,ant to check the relationship of prices or return on t,o different t"pes of shares- After calculating the correlation the follo,ings situation came in existence>a? #erfect positive correlation>b? #erfect negative correlation>c? Rero correlation-

(er)e#t positive #orre!'tionB

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#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

#erfect positive correlation exists ,hen the relationships in securities move in same direction- %his means ,hen the return of one share or securit" increases then the other shares or securit" ,ill also increase- It is sho,n b" N7-:-

(er)e#t ne"'tive #orre!'tion: In perfect negative correlation the returns move in reverse direction- It means ,hen the return of one t"pe of shares is increase the other share return does not follo, it and decrease in same ,a"- It is denoted b" I7-:-

Aero #orre!'tion: In this t"pe of correlation there is no relationship bet,een the t,o variables- On the base of return one securit" ,e cannot predict the other securit"- %he O denotes it-

Bse o) #orre!'tion )or the investors: 9orrelation defines the relationships of t,o variables- %hrough the use of correlation the investor can anal" e ,hether the portfolio is profitable or not-

(er)e#t positive #orre!'tion: %he positive correlation provides securities ,ith same trends- It is because ,hen return of one share has gone do,n the other share returns also follo, it- So both shares return goes do,n and the investor ,ill suffer loss- %he investor can protect himself from such losses b" appl"ing the result from correlation, b" diversification of his investments-

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Ce"'tive #orre!'tion: %he negative correlation is a good sign before making investment- .hen the return of one share decrease the other share return protect it ,ith increase return, combining the securities ,ith perfect negative correlation ,ith each other eliminate risk%here are less chances of suffering loss in investing in securities that are having negative correlation-

Aero #orre!'tion: In this condition the risk cannot be eliminated totall" but the practicall" it can be controlled up to some extent because it sho, no relationship among securities in portfolio-

(er)e#t Ce"'tive #orre!'tion: #erfect negative correlation ,ith each other share can reduce the risk- In the case of perfect negative correlation the returns related to one securit" compensate the other securit" because trend of prices are opposite to each other-

5ormu!': 9orrelation M Q& I >Q?>&? Q5 I >Q?5 &5 I >&?5

Bo'r& o) &ire#tors
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#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

%he board of director comprises the :7 directors

.orpor'te "overn'n#e 1eing a front line regularit" organi ation, the corporate governance mechanism at the ISE is built upon t,o tiers- .hereas one aspect of our corporate governance responsibilit" re3uires us to continuousl" monitor the conduct of the listed companies in accordance ,ith the 9ode of 9orporate (overnance, the other aspect deals ,ith internal mechanism of our governance ,ith a vie, to promote best business practices and the protection of the interests of the investorsIn its capacit" as a regulator for the listed corporate sector, the ISE is 3uite vigilant to monitorHenforce the listing regime including the code of corporate governance'o,ever, for effective results on this front, a close coordination amongst all Exchanges is considered to be the need of the time- It could enable all the Stock Exchanges to share and monitor the corporate sector more intrusivel" leading to the developments of the ,ell government corporate sector in the countr"- In this connection the ISE has also decided to participate as a sponsorHpromoter for the establishment of the Institute of corporate government in #akistanFrom the self regulator" aspect, the exchange continued to make strides in t,o of its most important functions that inter-alia related to the settlement of investors complaints as ,ell as action against the members for violation of rulesHregulations- %he Exchange also continued ,ith its polic" of the periodic s"stem audit of the ISE members ,ith regular intervals- *oreover during the "ear, all ma/or polic" matters ,ere dealt ,ith b" the 1oard ,ith ade3uate assistance of the respective committees- During the "ear, the

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ISE not onl" ,elcomed the de6cision of the SE9# for setting up of an Expert 9ommittee for demutuali ation and integration of the Exchanges- 1ut man" members of the Exchange also took a keen interest in the proceedings of the committee upon its cell for soliciting comments from the ISE membersDuring the "ear, t,elve meetings of the 1oard ,ere held till October 7@, 5776%he fre3uenc" of the Directors0 participation in the meeting ,as as underB

E!e#tion o) Dire#tors All elected and nominated Directors shall retire in the forthcoming A(* scheduled for October <7, 5776 and election of Directors ,ould be conducted in pursuance of Article A< of the Articles of Association of the ISE ,hereb" five Directors ,ould be elected b" the members- Four Directors shall be nominated b" the SE9# in terms of the provisions contained in the Articles of Associations of the Exchange- %he managing Director ,ould be an ex-officio member of the 1oard-

Appointment o) Au&itors *Hs- 4amil and co- chartered Accountant, auditors of the Exchange for the term 577<-5776 retire in the A(* and being eligible offer themselves for reappointment-

.ommittees
%here are number of standing committees to perform functions of management of ISE, $esearch and development committee6C

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

Information technolog" committeeSeminars, training S publicationFloor S mediation committeeSE9# coordination, rules S regulation committee%axation committeeEmplo"ment, administration S finance committee*embership committee9ompanies affairs, listing S active participation committeeDefault management committeeInter Stock Exchange committee)e, building committeeArbitration committee1uilding maintenance committee%he committees above mentioned perform a important role in different matters

existing in exchange- Each committee contains various members including one 9hairman of committee- %he article of association decide the follo,ing provisions regarding to the committees,

5orm'tion o) .ommittees:
%he director ma" from time to time and at an" time constitute a committee consisting of t,o or more persons, ,hether director or members, as the" think fit, to undertake an" function and responsibilities entrusted to it b" the directors- An"

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committee so formed shall, in the exercise of the po,er so delegated, conform to an" restriction that ma" be imposed on it b" the directors-

.onvener o) .ommittee Meetin"s:

A committee ma" elect a convener of its meetings, but, if no such convener is elected, or if at meeting the convener is not present ,ithin fifteen >:8? minutes after the time appointed for holding the same or is un,illing or un,illing to act as convener, the members present ma" choose one of their members to be convener of the meeting-

(ro#ee&in" o) .ommittee Members:

KA committee ma" meet and ad/ourn, as it thinks proper- Questions arising at an" meeting shall be determined b" a ma/orit" of votes of the members present- In case of an e3ualit" of votes, the convener shall have and exercise a second or casting vote-L >*emorandum and Article of association, #ageE@?-

-r"'ni:'tion #h'rt:

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#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

*anaging Director H 9EO *r- Aftab Ahmad 9h-

Secretar" H 9AO *r- &ousaf '- *akhdum

(eneral *anager Operations *r- Ahmad )oman

Dept- of (eneral Administration *r +amran An,ar E

Executive Secretar" *rs- )oreen $aheel

Dept- of Internal 9ontrol *r- Ashgar Abbas )a3vi

Dept- of Investor $elations *r- *- .aris )ia i

Dept- of 9ompan" Affairs *r- Sa3ib 4alil *alik

Hier'r#hy =eve!:
%here are different hierarch" levels in ISE- For officer the levels start from associate manager to *-D- and chairman of the exchange- %he tier of hierarch" is follo,ing, 9hairman*anaging DirectorDirectorsSecretar"(eneral *anager-

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Senior Executive Secretar"Associate *anagersStaff

Responsibi!ities: %he responsibilities of different persons are assigned on the bases of 3ualification, authorit" and experience-

.h'irm'n:
%he chairman is elected in the meeting of directors ,ith sub/ects to limit for one "ear- In case that person is not read" to be elected as a chairman it ,ill eligible to reelection- %he chairman can hold this position for consecutive three "ears under this condition- For next time he be ,ill eligible after one "ear for election- %he chairman holds office and observes that all functions are going according to the ,ill of directors%he chairman is liable to perform the follo,ing main functions, :- %o observe the policies of management and ,hole functions of exchange for the better interest of members and directors5- %o approval of an" document ,hich is sent b" managing director >*-D-? ,ithout an" ob/ection<- If on an" complex matter regarding to polic" making he thinks that the meeting should be called than he should call the meeting6- %o preside over all meeting of exchange-

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M'n'"in" Dire#tor ?M D @:
%he managing director is responsible for proper ,orking of the functions of exchange- 'e is liable for the functions of staff to the 9hairman- %he board does the appointment of *-D- for the period of three "ears- %he person ,ho is elected as a *-D- is restricted to hold an" other business or activit" of trading in Stock Exchange- 'e is an independent person in exchange and full time paid emplo"ee of exchange- 'e is liable for follo,ing right and duties, :- %o manage the routine matters regarding to exchange5- 'e can perform all functions for the betterment of management<- 'e can arrange the training of the staff according to re3uirement6- 'e can act for disciplinar" actions for smooth functioning in trading of members8- 'e responsible to provide the information to director on demand from themA- 'e can give the summar" regarding to policies of exchange in different mattersC- 'e is responsible to maintain the accounts upto date and present in meeting on the behalf of management-

Dire#tors:
%he director is elected in election- %he board of directors has po,er to give the approval for an" borro,ing for the purpose of future gro,th of exchange- %he director has right to inspect the accounts of exchange at an" time- %he directors has follo,ing rights and liabilities, :- %he directors in the meeting of the board can give approval of loan ,hether in the form of bonds, %F9s or an" other securit"-

85

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

5- %he" can inspect the accounts of exchange at an" time<- %he" can give their opinion regarding to an" matter in board meeting6- An" resolution cannot be approve ,ithout the prior approval of directors8- %he" can give approval regarding to an" investment for exchange in future-

Se#ret'ry:
%he secretar" is senior officer of Stock Exchange- 'e is head of secretariat and responsible to general management- 'e is also obligated for ,ork, ,hich is assigned to him from 9hairman and *anaging director- %he main functions of secretar" are, :- 'e possess the common seal of exchange and responsible for it5- 'e has authorit" to verif" the expenses before sending the minute sheet to *anaging director <- For annual general meeting he issues the notice to members6- On the instruction of chairman he is responsible to call the meeting board and to inform the members8- 'e can perform the functions regarding to director financeA- 'e responsible to attend the meeting the board of directorsC- 'e arranges the training and rehabilitation@- 'e is responsible for completion of an" formalit" regarding to authorities e-g- SE9#, *inistr" of Finance-

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#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

<ener'! M'n'"er:
%he general manager is responsible for all functions for all matters regarding to different Departments, ,hich are ,orking under him- 'e performs the follo,ing functions, :- 'e provides the consultanc" service to Departments5- 'e performs the dail" matters regarding to general management<- 'e is responsible for an" function regarding to an" Department on behalf of associate manager of Department6- 'e remains in contact ,ith SE9# and other exchanges for information8- 'e can make an" decision regarding to fine and delisting of an" compan" ,ith the consultation of Secretar" and *anaging director-

Senior Exe#utive Se#ret'ry:

Senior executive secretar" performs her part of duties for 9hairman and *anaging director- She perform the follo,ing main functions, :- %o note all telephone messages of 9hairman and *anaging director5- %o handle all incoming and outgoing faxes<- Arrange hotel booking of chairmanH *anaging director S Executives of ISE6- Arrange all appointments of 9hairman and *anaging director8- %o check all mail of 9hairman and *anaging directorA- *aintain all personal and official files of 9hairman and *anaging directorC- .ork as a telephone operator for chairman and *anaging director-

86

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

Asso#i'te M'n'"er:
Associate manager is head of his Department- 'e ,orks according to instructions of general manager and secretar"- %he associate manager sends summar" on different matter regarding his Department to above management:- 'e is responsible for functions of his Department5- 'e sends the report to *anaging director ,ith the advice of general manager<- 'e is chargeable if an" thing due or an" regulation exists regarding to la, related to his Department-

-ther St')):
%he staff performs various functions, ,hich are assigned to him- %he staff is not directl" responsible to all functions but on behalf of associate mangers-

(er)orm'n#e Ev'!u'tion:
%he performance of an emplo"ee is evaluated on the basis of ever" six months%he performance is evaluated ,ith the help of performance evaluation committee- %he letters are sent to emplo"ee for purpose of ackno,ledgement from secretar" on the behalf of committee-

S'!'ry 'n& ('#$'"es:

%he level of salar" is ver" lo, in ISE as compared to other business- On the time of offering for first /oining it start from $s-E777- %here is no other re,ard for emplo"ees

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of ISE on excellent performance- 'o,ever the exchange pa"s fee of emplo"ee0s children ,ho are not more than t,o in numbers-

Beh'vior o) Emp!oyees:
%he behavior of emplo"ees including top management var" from person to person, at average it is good- %he main problem in the ,a" of emplo"ee is the time availabilit" from ,ork, despite the problems the" coordinate to each other-

.u!ture: %he emplo"ees belong to different areas of the countr", so ISE is the multicultural organi ation but these cultural differences don0t hinder in the ,ork of emplo"ees-

='n"u'"e: *ost of the communication is done in !rdu but the official language, ,hich is used in correspondence, is English- %he language used to communicate ,ith other organi ations is English-

Dress: All officers are bound to ,ear paint shirts ,ith ties b" secretar" of exchange- As far as concern ,ith lo,er management the" have option in dress- %he" can also ,ear shal,ar kami -

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Bnity: .ithin organi ation all emplo"ees are considered like a part of famil"- %heir is must for efficient ,orking of Stock Exchange-

In&ex o) Sto#$ Ex#h'n"e

An ideal index is a true barometer of the stock market- AS such the composition of an index should be such like that it should not be affected b" extreme values and its sample should b" a true representative of the total strength- #resentl" the ISE is managing t,o distinct indexes via ISE )et,ork Index and ISE-:7 Index- %he Former ,as launched in the "ear :EE8 ,ith :7,777 base points comprising all listed scripts ,hereas ISE-:7 has been launched during 4anuar" 5776- It comprises the most li3uid scripts being 3uoted at the ISE- %he ISE )et,ork Index registered a change of 68G ,hile closing at ::@E6-<E at the end of the 4une 5776- On the other hand, the ISE-:7 index ,hich started from :6::-A6 as on 4anuar" 7:, 5776 made a surge of :5G ,hile closing at :8@C-@7 b" <7 th 4une 5776- %he ISE is still in the process to develop a more efficient market indicator- In the next phase index on the basis of free float ,ould be introduced b" the ISE%he index used b" +arachi Stock Exchange >+SE? is called :77-index, ,here the =ahore Stock Exchange >=SE? uses the 58-index- %he index is maintained in +SE b" sector ,ise%his index includes :77 companies and their shares are mostl" traded- %he index, ,hich is used b" Islamabad Stock Exchange >ISE?, is different from +SE and =SE%he index of ISE is the composite index

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#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

17#0 1700 16#0 points 1600 1##0 1#00 14#0 1400 (an )eb mar

#S% 10 #n e&

a!r

ma' (&n (&l 'ears(months start)

a&*

se!

o t

1#000

#S% net( or, #n e&

10000 points #000

0 97-98 98-99 99-00 'ears 00-01 01--02 02--03 03--04

7or$in" 't Dep'rtments o) ISE

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%he Stock Exchange has different Departments- %he Departments perform various functions according to their responsibilities- %here are five main different Departments in ISE, ,hich are follo,ing, :? Department of 9ompanies Affairs5? Department of Investor $elation<? Department of Internal 9ontrol6? Department of (eneral AdministrationDepartment of Finance

Dep'rtment o) 5in'n#e
%he finance Department deals ,ith all expenses and revenues for the Stock Exchange- %he Department uses both methods manuall" and through computer for recording entries- Sidat 'aider prepares the soft,are, ,hich is used b" Department for accounting purpose- %he exchange pa"s the specific amount for such right using2 beside this the soft,are maker also provides technical services about the soft,are-

.o&es o) so)t%'re:
In finance Department there is no direct entr" made about the good name- %he account title is established in soft,are ,ith code number chart b" Department- .hen a code is entered in s"stem the account name is ,ritten and further process for entr" is done in ledger and trial balance automaticall"%he formation of code is made chronologicall" *ain codeB 7: 8E

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

Sub codeB 7:-77: 7:-775 *ain code is ,ritten for title name and sub code is ,ritten for further explanation of accounts- %he finance Department uses the <7 main codes for assets and for liabilities%he some important main codes are,

M'in #o&es
*ain codes for assets Fixed assets Accumulated depreciation =ong term investment 9apital ,ork in progress Securit" deposits Advance against expenses Advance against expenses Advance against source Advance against tax deduction Advance prepaid 7: 75 7< 76 78 7A 7C 7@ 7E :7 *ain codes for liabilities Accumulated deficit *ember fund 9learing house taxes $ent received in advance Advance from companies Accrued expenses #a"able audit fee Securit" deposits from companies *ember default Sundr" creditors <7 <: <5 << <6 <8 <A <C <E 67

Depre#i'tion:
%he depreciation is charge at the different rate according to exchange polic"- %he depreciation is charged ,ith through straight line method- %he important rates of depreciation is follo,ing,

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R'te o) Depre#i'tion
Assets
Furniture Office E3uipment0s 9omputers Automation *otor vehicle

Rate of Depreciation
:7G :7G <<G <<G 57G

9ou#hers:
.hen the expenses are done the finance Department makes the voucher before the entr"- %here are t,o t"pes of vouchers, >a? $evenue vouchers or receipts>b? Expense vouchers%he voucher contain the follo,ing things, :? )ame of person ,ho made the expense or give revenue5? Date<? #articulars6? Amount8? %otal-

Expense:
%he expenses cannot be made ,ithout the permission of associate manager of general administration, *anaging director, 9hairman and secretar"- 1efore expenses the

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#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

list is made for expenses ,hich is called minute sheet- It is sent to associate manager, managing director and chairman for approval- After the approval on sheet the voucher are made according to list and pa"ment is given in form of che3ue or cash- If the expense is related to routine matter and small than pa"ment is made in form of cash- In case of high pa"ment, che3ue is made- If the others Departments ,ant to do some expenses for the purpose of business than the" ,ill sent internal office memorandum > IO* ? to finance Department- %he internal office memorandum also contains the 3uotations from different stores- After observing the best alternative the associate manager of general administration asks accountant to prepare minute sheet for approval, the remaining process ,ill remain same for expenses-

Revenues:
%he revenues are received from various sources- .hen finance Department receives the revenues, the vouchers are made ,ith name of sources and date at ,hich it is received b" Department- %he vouchers are made ,ith the help of carbon papers- %he original cop" is given to the person for his record and carbon copies ,hich contains the "ello, and $ed color is maintained in the record-

/r'ns)errin":
%he depositar" slip is maintained for the purpose for deposit in the bank- It contains t,o parts- .hen the amount is submitted in the account the entrance is made on depositar" slip- If the cash ,ill be deposited in the bank than the entr" is made ,ith the note of cash ,ith name of source- 1ut in the case of che3ue the che3ue numbers are

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,ritten on the depositar" book- %he one part of the book is torn and disclosed ,ith che3ue for sending in the bank- %he other part remained in the book for record-

B'n$ St'tement:
%he bank statement is received from bank after ever" six months but no, it is collected before ever" 3uarter or at an" special re3uirement- %he cash book balance is reconciled ,ith bank statement, if an" discrepanc" arises than it is conformed and ad/usted-

Bu&"et:
%he budget is made 3uarterl" basis and than compared ,ith "ear- For the purpose of budget the Department asks other Departments to send the estimated expenses and revenue- If there is an" special re3uirement exist than ,rite- %he Departments send their reports for ever" 3uarter- %he Department compares all estimated budgets before closing of "ear, if the situation is not meeting according to standard than the Department asks other Departments to make effort for recover" before closing of the "ear-

Au&it:
%he audit is made ,ith strict measures, there are t,o t"pes of audits ,hich is used in ISE, :- Internal audit5- External audit-

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Intern'! 'u&it: %he Department of finance makes the internal audit for advance disclose of record before the starting external audit- .hen the external audit is starts it made eas" for the Department to become fast for such purpose-

Extern'! 'u&it: %he audit is done at the end of 3uarter in ISE b" a reputable firm%here are

numbers of auditors in the list of ISE- After the completion of 3uarterl" audits, the annuall" audit is also done-

(rin#ip'! o) 'u&it:
Darious firms from "ear to "ear complete the audit- In annual general meeting the decision is made for selection of auditor and its remuneration-

Depart$ent of #nternal *ontrol

%he Department of internal control performs the technical sensitive functions in Islamabad Stock Exchange >ISE?- %he main functions of Department are,

:? Operate ,ith risk management in ISE5? %o deal members of ISE<? %o supervise the information technolog" >I%? Department and clearing house-

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6? %o deal ,ith *arket *onitoring and Surveillance .ing >*S.?8? Send reports regarding to trading and related matters to *anaging director and Secretar" of exchangeA? %o give suggestions to SE9# for imposing penalties on the member in the case of violation-

%he risk management is the important factor in the business of Stock Exchange- %he Department ,ork under the supervision of *arket *onitoring and Surveillance .ing >*S.? of SE9#- %he clearing house is a sub Department of Internal 9ontrol Department-

-per'te %ith Ris$ M'n'"ement:

%he risk management is the important factor of ISE, different measure are adopted for such purpose in ISE- For efficient functions, a separate Department is ,orking in SE9# ,hich monitor the functions continuousl"-

De'! %ith Members:

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%he Department deals ,ith the members and gives them instructions regarding to different matters relating to trade- If the member violates an" rule regulation than the Department recommend and impose penalt" for such violence ,ith the help of SE9#-

De'! %ith In)orm'tion /e#hno!o"y ?I/@ 'n& .!e'rin" House:

%he information technolog" Department and clearing house are sub Departments of internal control- %he Departments send report regarding to routine matters to internal control- %he Department also performs some administrative functions for these Departments-

Reportin" Ro!e:
%he Department is liable to send report to secretar" and managing director- .hen a special case rises than the Department sends special reports and consults them in affairs-

M'r$et Monitorin" 'n& Survei!!'n#e 7in" ?MS7@:

%his ,ing ,as ne,l" established2 it is directl" connected to ISE and monitors the risk functions- If an" complexit" in matter arises than the Department informs and sent notices to members on the behalf of Department of internal control-

.ontr'#t )or %eb site:

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#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

%he Department contract for ,eb site ,ith companies ,ith the help of I% Department in ISE- %he I% Department provides the technical services for such purpose-

(ro#ess o) system 'u&it:

%he s"stem audit is done b" Department of internal control- %his s"stem ne,l" introduced b" ISE, under ,hich the members are bound for audit from reputable charted accountant firm- After reporting from charted accountant firms a list is prepared for purpose of such audit regarding to members- If the report is unclear or 3ualified than some time is given for reaudit, despite the time giving if the members fail to reaudit or for clearance such audit, the report is send to SE9#- After the receiving the report from SE9#, the action is taken against such member-

S#ope o) system 'u&it:

:- %o ensure that the members are follo,ing all the rules and regulations of the exchanges5- %o ensure that there is a proper documentation and interaction bet,een client and member<- %o ensure that the member is operating trading ,ork properl" as re3uired b" exchange6- %o ensure that the members are properl" pa"ing the dues of exchange8- %o check that in case of agents, the members are compl"ing ,ith regulation that relate to the registration b" exchangeA- %o make sure that the books and record maintain proper-

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#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

C- %o ensure that the member registered properl" ,ith SE9# and rene,s its registration annuall"@- %o ensure the maintenance b" the member of proper record of transactions involving central Depositar" compan"E- %o ensure that the member prepare its annual financial statements and that these are audited b" a practicing charted accountant ,here the member is a coporate one:7- %o ensure that the future contracts are according to regulation::- %o ensure that the lots transactions are properl" recorded-

Dep'rtment o) #omp'ny A))'irs

%he Department of compan" affairs is responsible for all functions and matters related to companies ,hich are listed in Stock Exchange or the companies ,ho ,ant to be listed in Stock Exchange- %his Department sent reports to (-*, sectar" and *-D- for final approval on decision- %he Department receives instructions from SE9# from time to time- %he" have authorit" to list or delist an" compan" if the compan" does not meet the re3uirement of la,- %he" have also authorit" to impose the penalties for late submission of 3uarterl" or annuall" report or in case of not submission according to code of corporate governance and other related regulation%he Department established ,eb site in ,hich the sales, profit before tax- 1ook value, listing date and other related information is given for investor facilit"- On launch this facilit" the investors can take decision about the investment in various companies-

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#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

%he main function of Department deals ,ith companies affairs on behalf of Islamabad Stock Exchange >ISE? according to instructions of Securities and Exchange 9ommission of #akistan >SE9#? and *inistr" of Finance- In routine matters the Department performs the follo,ings functions,

Re#eive Reports:
%he Department receives reports from companies and maintains it- If the reports are in accordance ,ith rules and not tempered than the Department sends it in the brokerage houses for investors then the" send to share holders-

Impose (en'!ties:
%he Department can impose penalties on the companies according to code of corporate governance on companies for violation of rules made b" ISE and SE9#-

=oss o) sh'res:
If the shares are lost from shareholders due to an" reason, after receiving the complaints from shareholders the Department verifies about the existence of shares in Stock Exchange- %he Department sends the re3uests to companies for issue of duplicate shares-

Divi&en&s:

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#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

%he Department of 9ompanies affairs can take actions against the companies, ,hich have failed to pa" dividends to shareholders during five "ears ,ith the help above management-

.o&e o) .orpor'te <overn'n#e:

%he main document, ,hich comes under consideration of Department of companies0 affairs, is the code of corporate governance, ,hich is implemented on three exchanges ,ith the effect 5775%here are some important provisions of code of corporate

governance are follo,ing, All listed companies shall encourage effective participation of independent director non executive directors, including that representing minorit" interest, on their board of directors ,ho represent the minorit" shareholders %he director of listed compan" shall, at the time of filling their consent to act as such, give a declaration in such consent that the" are a,are of their duties and po,ers under the relevant la,s and the listed compan"0s memorandum and article of association and the regulation of listing in Stock Exchanges )o listed compan" shall have a director, a person ,ho is serving as a director of ten other listed companies )o person shall be elected as a director of a listed compan" ifB >a? 'is name is not borne on the register of )ational tax pa"er except ,here such person is non-resident and

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>b? 'e has convicted b" court of competent /urisdiction as a defaulter in pa"ment of an" loan to banking compan", a development institution, or being member of Stock Exchange he declare defaulter of such exchange A listed compan" shall endeavor that no person is elected or nominated as a director if he or his spouse is engaged in the business of stock brokerage %he tenure of directors should be for three "ears %he directors of listed companies shall exercise their po,ers and carr" their duties ,ith the sense of ob/ectivit" /udgment and independence in the best interest of the compan" %he chairman of listed compan", if present shall preside over the meeting of board of directors %he board of director shall meet at least once in the 3uarter of ever" financial "ear All listed shall make carr" appropriate arrangements for courses for their directors, for making ac3uaint them ,ith their duties and responsibilities %he appointment, remuneration and term and conditions for emplo"ment of the chief financial officer, the compan" secretar" and the head of internal audit of listed companies shall be determined b" the 9EO ,ith approval of the board of directors, the 9FO or the compan" secretar" of the listed companies shall not be removed except b" the 9EO ,ith the approval of the board of directors %he 3uarterl" unaudited financial statements of listed companies shall be published and circulated along ,ith director0s revie, on the affairs of the listed compan" for the compan"-

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=isting of companies
)o dealing in securities of a compan" shall be allo,ed on the exchange%he permission under sub regulation >:? ma" be granted upon an application being made b" the compan" or in respect of the securities in the manner described- %he exchange such permission ,ill concern among other things, sufficienc" of public interest in the compan" of the securities %he exchange shall decide the 3uestions of granting permission ,ith in a maximum period of three month from the date of receive listing application- In case the permission is refused, the reason thereof ,ill be communicated to the applicant and the authorit" ,ithin t,o ,eak of the decision %he board ,ill be the sole authorit" to grant defer or refuse such permission and ma" for that purpose, relax an" of these regulation sub/ect onl" to 5H< ma/orit" of the directors present at such meeting of the board-

De>!istin" 'n& suspension:

A listed compan" shall be delisted or suspended for the follo,ing reasons, >a? If its securities are 3uoted belo, 87G of face value for a continuous period of three "ears#rovided that if the shares of the compan" 3uoted at 87G or above of their face value then such a rate is maintained for a continuous period of thirt" ,orking da"s>b? if it has failed to declare dividend or bonus IFor five from the date of declaration of last dividend or bonus or right shares-

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II-

In the case of manufacturing companies, for 8 "ears from the date of commencement of production-

III-

For five from the date of commencement of business in others cases-

>c? If it has to hold it annual general meeting for a continuous>d? If it has failed to hold it annual meeting of a continuous period of < "ear>e? If it has gone into li3uidation either voluntar" or under court order>f? If it has failed to submit the annual listing fee>g? )o 9ompan", ,hich has been de-listed or suspended, shall be resorted and its shares re-3uoted until it removes the causes of delisting and receives the assent of the board for the restoration-

Re#or&in" Dep'rtment
%his Department although is sub Department- %his Department is responsible for maintain the record for all matter related to Stock Exchange- %he" have different folders, for individuals, for general nature and for compan"0s affairs- %his record is maintained manuall", the" maintain the shelves according to nature of companies e-g- the companies related to petroleum are maintained in one part of shelves, chemical sector is also maintained in one area of shelves- For external and internal correspondence, the Department maintains t,o t"pes of record registers separatel"- %he register contain the follo,ing columns, IIIIII$eference )o *onth and date$eceiving number-

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ID-

9ompan"TDepartment name-

%he dispatch register contain follo,ing columns, IIIIIIIDIssue number*onth and date#lace ,here to sendSub/ect-

Intern'! #orrespon&en#e:
In ISE most communication is done through letters, ,hen a letter comes from outside the" maintained a record in shelves according to nature of letter ,hether it is related to companies affairs or general in nature- On arrival first the letter is stamped on ,hich date, the da" name and serial number is given to letter- In recording register the letter is registered- After recording the" sent the letter to concerning Department for further process- If the Department is not mentioned on letter in ,hich the letter ,ill go%he recording Department observes the place of letter- %he generall" letters are sent to Department of general administration- .hen the process is complete from the concerning Department letter is sent to sectar" and *-D- for final approval- After returning the letter from concerning Department the recording Department maintains the cop" of record in related file- For faxes and telegraph same procedure is adopted-

Extern'! #orrespon&en#e:
External correspondence is done after the process of documentation is complete%he different Departments sent repl" or instructions to companies or government

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Departments- Ever" Department sent letters to companies or different external Departments according to their responsibilit"- %he record section maintains a cop" of document ,ith entr" on register- %he record on dispatch the register is maintained ,ith date ,ise and name of compan" or corresponding name ,here the letter ,ill go- After preparing the envelops according to instructions of Departments ,here the correspondence ,ill go, a cop" of document is disclosed in compan" or Department files ,hich is maintained separatel"For faxes and telegraph the same method is applied-

Bro$er'"e House
%he brokerage house in ,hich I ,orked is run b" a member, ,hose name is Excel securities >#vt-? limited- %here are three t"pes of brokerage houses in Islamabad Stock Exchange- %hese are follo,ing, >a? Individual brokerage house>b? #artnership brokerage house>c? 9orporate brokerage house%he corporate brokerage houses have a private limited status- %he right of o,nership for member is transferable to other person- %here are ::7 members in Islamabad Stock Exchange >ISE?- 1ut the members ,ho transact the business in Stock Exchange are <@ in number, in ,hich individual members run A8 houses and 68 exist in corporate form%here is no such fixation some about the transfer of membership to other person2 it can be transferred at an" time- %he exchange charges fee for transfer of membership-

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System o) House:
%he brokerage house is in the basement of Islamabad Stock Exchange- It is o,ned b" individual- %he houses comprise three big rooms including one hall in ,hich the trade is done-

.omputer system:
%here are t,o s"stems ,orking in hall, the t,o screens ,ork at a time- In upper screen the activities of trade in +arachi Stock *arket >+SE? ,ith the prices of shares and sign of trend is sho,n- %he screen moves s,iftl" ,ithin seconds ,ith trading activities%he lo,er screen sho,s the prices of Islamabad Stock Exchange >ISE? ,hich is maintained b" the brokerage house-

.entr'! Deposit'ry .omp'ny ?.D.@:

%he central depositar" is introduced some time ago for the purpose of on line trading- %he Stock Exchange management has given reminder to all companies that the" should become member of central depositar" compan" >9D9? before of 4ul" <:, 577<%he central Depositar" 9ompan" has a public limited status and its share is floating in market- Due to introduction of 9D9 no, the duplication of shares is not possible in market- %his s"stem ,ith rapid service also provides accurac"-

Members:
%here are ::7 members in stock Islamabad Stock Exchange >ISE?- %he active members are , in ,hich are individual and CA are corporate- In Islamabad Stock

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

Exchange >ISE? the individual brokerage houses are more in number as compared to corporate brokerage houses-

/r'&in" (ro#ess:
%he trading process is done on line but there is fiscal share trading also occur for some companies ,hich is not become the member of 9D9 s"stem up to kno,, there is hope that the fiscal trading ,ill be abolished.hen an investor ,ants to sale the share he first observes from the screen the price of shares of compan" ,hich he is holding- .hen he sees that he is in the position to make the profit in the market b" making the comparison of the price of purchase and at ,hich he ,ant to sale he asks the broker to sale his holdings- In selling order he tells the compan" name, number of shares and the price at ,hich he ,ant to sale- %he broker ,rites the instruction on computer for sale and place-

/erms to be#ome the Member o) Bro$er'"e House:

For open the brokerage house the permission from Securities and Exchange 9ommission >SE9#?- %he fee and other criteria var" according to instruction of SE9#%here are follo,ing criteria,

i? ii? iii? iv?

'e should be a citi en of #akistan%he age limit is at least 5: "ears ,ith effect the date on ,hich he is appl"ing'e should be at least graduate'e should pa" fee according to latest information $s-C877, 777-

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v? vi?

'e should national tax pa"er'e should not be defaulter of an" financial institution or an" bod" such that%he membership is transferable to other person, ,ho is able to meet the criteria,

,hich are mentioned above- All three exchanges in the countr" are restricted b" Securities and Exchange 9ommission of #akistan >SE9#? that the" cannot involve in an" trading activit" regarding to bu"ing and selling of shares- %he follo,ing activities, ,hich a brokerage house or individual can perform ,ith the permission of SE9#, these are, >a? 'e can sale his seat to other person>b? 'e can be member of other Stock Exchanges at a time>c? 'e can issue a mutual or units in the form like I9#-

.ommission S!'bs: ISE

#rices =imit7-7:-:E-EE 57 - EE-EE :77-6EE-EE 877-EEE-EE Deliver" 7-7@ 7-7@ 7-:5 7-@ %rade 7-76 7-78 7-: 7-:8

;SE
Deliver" 7-7: 7-:< 7-:8 7-5 %rade 7-7< 7-: 7-:5 7-:8 Deliver" 7-:5 7-:5 7-:8 7-5

5uture
%rade 7-:5 7-:5 7-:8 7-5

Investor in Bro$er'"e House:

%he investors in brokerage house in most cases are not professional degree holders- %he ma/orit" of them is graduate- Some of them do their trading on dail" bases, the" are called /obbersinvestors%he charge of commission for /obbers is lo, than other

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5uture (rospe#ts:
%he future prospect is that the" are making a plan to launch a program on %D and $adio ,ith the help of Stock Exchange management for a,areness of general public about Stock Exchange- %he other one is that the" are preparing a book to guide investor%he" are thinking to bu" a ne, bigger place in ne, building of ISE and also considering hiring more professional emplo"ees-

.!e'rin" House
9learing house is responsible for the clearing in settlement in the Stock Exchange%he staff of clearing house is expert in their field- %he" use all ne, technolog" for the process of settlement of the accounts and clearance- %here are follo,ing responsibilities of clearing house, $esponsible to make clearance of accounts to members*ake the statement about the members trading on dail" bases9harge the special fee on the members on their volume, ,hich is called =aga*ake allocation about the member protection fund, investor protection fund and commission of SE9# from =aga charges according to rule and regulation 9heck the exposure limits of the members*ake allocation of amount in three banks in ,hich the member holding accounts- For such purpose the clearing house makes the statement of balancing in banks in ,hich

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the total receivables should e3ual to total pa"able- %he balances cleared on the banks through the dra,ing check on each other bank %o make sure that the clearing is done ,ithin time limit b" the brokerage houses9ollect of the securit", ,hich is :8G, returns able- On living or on the occasion of ,inding up make arrangement to return the securit" to the member $eceive the bank statement from three banks and match the balance ,ith clearing register $eceive the che3ue of margin if the member ,ants to open his exposure more and than open the exposure-

7or$in" pro#ess in #!e'rin" House

%he ,orking in clearing house is ver" sensitive in nature- %here is a counter of clearing house ,hich is located the near the management office- Each brokerage house sends a person dail" ,ith che3ue signature b" the member for settlement- %he clearing house receive the che3ue from representative of brokerage house and give another che3ue after taking the signature to him for his o,n settlement- %he record is maintained date ,ise b" Department about the trade%he brokerage house is connected on line ,ith I% Department- %he trading activit" is also observed on lines, ,hich are done b" the members- %here is programming in computer s"stem ,hen a member exceeds the limit of exposure, he is pointed out automaticall"- %he SE9# is also connected ,ith the net ,ork to observe the trading activities of members-

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Se#urities 'n& Ex#h'n"e .ommission .h'r"e:

After taking the =aga the deduction is made for SE9# charges b" clearing house,%he rate of such charges is 7-777EG-

Member (rote#tion 5un&:

%he Department also allocates the amount for member protection fund after deduction of SE9# commission from =aga- %he allocation is made at the <<-<<G for such fund-

Investor (rote#tion 5un&:

%he clearing house makes arrangement for investor protection fund- %he allocation is made at the rate of <<-<<G after the commission of SE9#-

(rin#ip'!s o) .!e'rin" House:

Follo,ing are the principals of the clearing house-

(rin#ip'! o) ='"' .h'r"in":

=aga charge is made at the rate of 7-77AG charges on the trading of members%he rate is fixed b" the consultation of SE9# and management of Stock Exchange-

(rin#ip'! o) /imin":

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#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

%he clearing house is not responsible for the trading ,hich is done after the limit of time ,hich is decided b" the management ,ith the consultanc" of SE9#- If due to time limit the market is closed and the broker involve in trading process ,ith other broker than the trading ,ill be done fiscall"- %he clearing house is not responsible for such transaction in the market-

(rin#ip'! o) (erio&:
%he clearing house is ,orking under the %N< s"stem- %his mean the ,hen the trade is done on *onda" the collection of che3ue both receivables and pa"ables is made on .ednesda"- !nder this s"stem the recover" collection is receivable on the members on %hursda"- Similarl" for Frida" trading the claim is made on %uesda" and recover" can be collected from banks next da" from the member accountSome trading is done under the %N: s"stem but it is done less as compared to %N< s"stem- %N: is done at the time ,hen companies announce the dividend in market-

(rin#ip'! o) .ommission:
%he SE9# charge the commission at the rate of 7-777EG from the Stock Exchange- %he clearing house first separate the SE9# commission from the =aga charges and after that the necessar" deduction is made-

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(rin#ip'! o) (!e&"e:
%he clearing house also maintains the pledge from the members- %he amount of such pledge is deducted at the rate of :8G- %he amount of pledge is returnable to the member ,ithout an" deduction- %here are follo,ing principals of pledge, >a? %here is list of the <<7 companies, ,hich is prepared b" +arachi Stock Exchange >+SE?, selected companies are the best performer ,ith maximum volume- %he list contains the market price of each compan" share and earning per share >E#S?>b? %he ISE follo, this list because the trading nature is same for both exchanges>c? %he value of market price or E#S ,hich ever is greater is taken and then multiplied b" the 3uantit" of shares*arket #rice Quantit" M %otal amount Or E#S Quantit" M %otal amount %he greater high value of market price or E#S is taken for such multiplicationAfter this :8 G is charged on total amount- %he purpose of such pledge is that the ,orth of member increase ,ith the appreciation of price or E#S, so there is need for the guarantee ,ith such potential to secure the client or investors-

(rin#ip'! o) Re#eiv'b!es:
If the member does not submit the che3ue in time than he is liable for such thingIn this condition the exchange restrict the member for next da" to enter in trading-

(rin#ip'! o) Boun#e .he0ue:

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If the che3ue is presented b" the member and bank call it ,rong than the clearing house asks the member to present a ne, check- %he ad/ustment is made in this form on the next da"-

(rin#ip'! o) Exposure:
%he member of the exchange authori es the amount of exposure- %here are charges for ever" exposure in the form of slabs- If due to decrease in prices of shares the members ,orth decrease the exposure limit than the charge is made in reverse position instead of decreasing i-e- Due to decrease the prices of shares the ,orth of member go do,n on E million than the charges ,ill not decrease and remained at 7-8 million- %here are follo,ing table about the exposure limit,

.h'r"es on Exposure =imit

Exposure Margin Rates

!p to $s-8 million to $s- :7 million7-8 *illionAbove $s- :7 million S up to $s- 57 $s-7-8 million plus :7G of amount millionAbove $s- 57 million up to 87 millionexceeding :7 million>$s-:-8 million? $s- :-87 million plus 57G million ,ill amount exceeding $s- 57 million>$s- C-87 million? Above $s- 87 million and up to $s- :77 $s- C-87 million plus 58G the amount millionOver $s- :77 millionexceeding 87 million>$s- 57 million? $s- 57 million plus amount exceeding $s-

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:77 million>$s- 87 million for exposure and margin up to 577 million-?

(rin#ip'! o) Cet In#ome )rom #!e'rin":

.hen =aga is charged on the members accounts after deducting the commission of SE9#, investor protection fund >I#F? and member protection fund >*#F? remaining income is the net income from the clearing- %he allocation for I#F and *#F is made at the rate of <<-<<G for both after deducting the charges of commission for SE9#-

Income from clearing M =aga I SE9# commission- I#F at <<-<<G - *#F at <<-<<G-

Dep'rtment o) Investor Re!'tions

Department of investor relations perform the follo,ing functions and are headed b" associate manager

:? %o provide all information ,ith respect to members on re3uirements of investors5? %o deal ,ith the complaints of investors in Stock Exchange<? %o meet all legal compliance in /udiciar"6? *aintain the ne,spapers-

In)orm'tion to members:

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%he information is provided to investor on re3uirement regarding to member and brokerage house-

.omp!'ints o) Investors:
%he complaints are received from investors, after completing the procedure the documents are sent to the board of directors for purpose of final decision- If the board observes that the complaint is verified than the board makes the member bound for recover"- In case of not follo,ing the case is referred to court for recover"-

=e"'! #omp!i'n#e:
%he Department of Investor relation is the representative of ISE in the court- It is also responsible to provide all record regarding to member on the demand of court- %he Department should ,ork for investor ,elfare-

M'int'in ne%s:
%he Department is responsible to maintain the record of the ne,spapers, if the ne,s is related to the important factors, ,hich can affect the performance of stock market and related business-

(erson'! experien#esB

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After compilations of second semester I had to do internship in business organi ation for maximum @ ,eeks and minimum A ,eeks- I applied in various organi ations and gave intervie,s- In appl"ing these organi ations I learned man" things, like giving intervie,s, ad/usting "our 9-D- according to specific postI applied in Islamabad Stock Exchange through reference of Sir Dr- (-S-+- )ia i- I gave intervie, in ,hich I ,as asked about pro/ects I have done m" t,o semesters and 3uestion ,ere asked about m" courses, I ,as told that I ,ould be informed about m" selection- On : 4ul" I got confirmation letter in ,hich I ,as informed about acceptance me as interneeOn m" first da" I ,as briefed about the plan of internship and Departments I had too ,ork- %he incharge of internship at ISE, *r- *- .aris )ia i told me about office rules and regulationsI started m" internship in finance Department on the same da"- %he head of Department ,as *r- +amran- First of all I ,as briefed about the responsibilit" of the Department and ,ork done- I started practical ,ork of reading letters of various companies addressed to ISE- *ostl" as the ph"sical "ears ended ,hen I started m" internship to the ma/orities of letters ,ere about annual listing fees, the ma/or source of revenue for ISE and ,ere along ,ith checks- I ,as assigned to make receipts to the senders and also keep record of the receipt on accounts register and on computer b" used of soft,are developed for purpose of keeping financial record of ISEI also anal" ed ,hether the" have paid challan fee or not- And if challan form ,as not attached then a letter ,as send to them to give that form-

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%he record of each transaction ,as kept up to date because these records ,ere kno,n to auditors, ,hich ,ere *HS 4amil and 9o-, chartered accounted- %he accounts ere first kept in ledger, then into sub accountsI also made bank reconciliation in ,hich accounts ere ad/usted for difference in bank statement and accountsI anal" ed various file including financial data ,hich help me to kno, about the expenses of ISE and its sources of revenueIn :EE@ ISE got permission from 9DA- to build :8 stories building in 1lue Area near Saudi #ak %o,er and no, it is considering to build a 56 stories t,o to,ers for ISE to,ers- For this purpose ISE management has hired the services of professional consultanc" from E/a and %abasam charted accountants- %he" are asked to ,rite a feasibilit" report on building of ISE- For this purpose the" made t,o proposals ,hich are on stand alone basis, ,hich one can be accepted at a time- %here are different assumptions for these pro/ects%hese cash flo,s ,ere predicted b" anal" ing future prospects and past trends and various methods ,ere applied to calculated I$$, )#D, #1#, #I and suggest ,hich one ,ill be better%hese t,o proposals ,ere presented in meeting of 1oard of Directors to decide about ,hich one to select- %he information is confidential and cannot be explained furtherI also anal" ed financial statements of ISE, and the trend sho,s that ISE0s revenue is increasing, because listed companies and amendment in annual listing fee-

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I ,orked < ,eeks in finance Department, it gave chance to appl" bookings kno,ledge on real business transactions- I ,orked in Department of companies0 affairs, under *r- Sa3ib ,ho holds *asters Degree in economics and is doing *- #hil- 'e ,as ver" cooperative person ,ho informed me about man" regulations of ISE SE9# that ISE is bound to follo,, these includes brokers and agents affair and regulations made b" ISE to regulate securities market- It included reporting of lost shares b" o,ners ,ho ,anted duplicate shares- %he ISE informs compan" and issues o,ners shares after inspection1ut this case has been handled b" 9D9 ,hich keeps electronic record of sharesI also had chance to anal" e the un-audited and audited interim and annual reports of various listed corporations- As ISE makes sure that proper disclosure of information is given, to o,ners ,hich are share holders, about an"thing, including general meeting0s decisions%he corporate re,ards, such as bonus shares, right shares and dividends are also informed to ISE on specific dateI also studied rules for listing and delisting of companies- As a case stud" I had chance to stud" listing of !1=, !nited 1ank =imited and checked that it meets re3uirements of SE9# and ISEI also made ne, clippings ,hich ,ere given to ne,s papers sho,ing ,hich are ma/or gainer and ma/or loser, total turnover and ISE net,ork index and ISE :7 indexI also ,orked in DD9 ,hich keeps electronic records of shares and sa, ho, these records are kept and ho, transfer are reported and record, ho, )99 ,orks and ,hat functions ,here performed b" it-

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I ,orked one ,eek in Department of compan" affairs and learnt about broker affairs and their agents- I learned ho, s"stem audit of brokers is done and ho, the" are picked for s"stem audit- .hat penalties are charged for noncompliance ,ith auditors; I also learned about exposure slabs that the members have to pa"- .hether the" are follo,ing rules or not; I sa, report of s"stem audit of =asani SecuritiesI also had a chance to ,ork ,ith broker for fe, da"s, ,here I learned about badla transaction and badla changes- 'o, market trends predict the prices of securities, ,hen to bu" and sell securities- %hus ho, speculations affect market- 'o, bid and offer are made and ho, transactions are placed, shares are traded- 'o, investors are guided and ,hich companies are favorable to investI also gave presentations in information session of ISE to public at large, about ho, shares are traded in Stock *arket and ,hich companies are better to invest- 'o, to anal" e companies, to ensure better returns; .hat precautions must be taken;

A#hievements o) ISE
As the econom" of the countr" performed ver" ,ell so ISE achieved man" land marks during this "ear- %he achievements ,ill restore the confidence of the investor on ISE- %he follo,ing achievements are remarkable for ISE, :- Formation of computeri ed trading s"stem is also one the achievements of ISE%he formation of 9D9 and )99 has reduced man" complications and no, monitoring of shares and related issues is easier and s"stematic- %his has enabled abolishment of ph"sical share trading ,hich ,as source of errors-

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5- A final roadmap has been chalked out to phase out the carr" over transactions s"stem >badla? from the Stock Exchange in #akistan ,hereb" this s"stem ,ould b" eliminated b" 4une 5778- In order to replace the old s"stem, international model of margin trading shall be introduced b" the Exchange- For hedging needs, the use of derivative market shall be promoted- In this connection, the SE9# has allo,ed future trading in 5E scrips- It is hoped that this transition ,ould bring a health" change for sustainable development of the market

<- As a part of good government, the brokers are supposed to abide b" the s"stems and norms devised for the trade and business in transparent manner- %he ISE took a leading step to conduct the s"stem audits of the members and the programmed of s"stem audit b" the practicing charted accountant firms ,hich ,as initiated in late 5775- %he exercise of s"stem audit of members has proved beneficial to both the members and the Exchange as ,ell- It enabled in recogni ing the ,eaknesses of the s"stem ,hich has led to an overall effort to remove the observed deficiencies-

6- %his "ear seven companies applied for listing ,hereas last "ear onl" one ne, entit" ,as listed at the ISE- %his sluggish gro,th of the corporate sector is due to enforcement of strict securities la,s and monitoring measures besides the shift from e3uit" rising to cheap borro,ing through the mone" market-

E:

#$OS#E$I%& %'$O!(' %$A)S#A$E)% *A$+E%

8- As part of the exercise to create li3uidit" and make the market more active, a change in tick ,as affected this "ear b" reducing the tick from paisa five to paisa one- %his measure has been appreciated b" the participants and has helped to an extent in the enhancement of the trade activities-

A- During this "ear ISE ,as able to get rid of its accumulated losses and its income ,as 5:G more than previous "ear-

C- %he index of ISE sho,ed trend of increase-

@- %he ne, contract of ISE building ,as singed and permission of 56 stories building ,as got-

5uture out!oo$ o) Is!'m'b'& Sto#$ Ex#h'n"e

%he Islamabad Stock Exchange faces man" challenges in the perspective of short, medium and long term future strateg"- A look at the performance of the Stock Exchange during the last man" "ears reveals that not onl" the Exchange struggled to develop itself into a respectable alternative trading venue but it also could not achieve a desired financial strength that is crucial for an" competitive business these da"s- %he declining trading volume coupled ,ith a falling trend in the listed companies ,itnessed at the ISE during the last "ear points to an uncertain future for the exchange during the times ahead%ogether ,ith the gro,ing call for the merger and demutuali ation of the existing Stock Exchanges in #akistan, it is clear that our Exchange ,ould also need to adopt man"

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changes in its structure and H or business model in the future- .hereas in case of a decision for the merger of the existing Stock Exchanges in one form or the other, the ISE is determined to press ahead for a merger on e3ual basis, ho,ever, in case of demutuali ation of the Stock Exchanges in stand alone or separate basis, the ISE ,ould need to explore a ne, business models or an" combination of the existing business model ,ith an innovative approach to minimi e its dependence on traditional sources of revenue, such as listing fee etc- In this connection, an" decision on the future strateg" of the ISE is dependent upon the regulator0s choice for an" particular market structure in the countr"$egardless of the above uncertain challenges, the long term viabilit" of our Exchange ,as and is still dependent on achieving diversification in our future revenue stream- In the past, the ISE had remained unsuccessful in exploiting the true potential of its investment in the real estate propert" meant for constructing the ISE building- It ,as due to the problem associated ,ith our old construction agreement an" progress on the construction of the building had remained stalled for "ears- 'o,ever, after fruitless negotiations of the last six "ears, the ISE has ver" recentl" entered into a compromise agreement ,ith the contractor that has enabled the ISE to terminate the contract upon a pa"ment of $s-558-77 *illion- .ith this decision, it has no, become possible to make use of our most pri ed asset to the ultimate final advantage of the ISE as an institution%he financial feasibilit" for the pro/ect reveals that the pro/ect ,ould add a substantial stream of excess cash flo, to the ISE even after meeting the construction expenses and after leaving more than 87G propert" for the use b" the ISE and its members- In this ,a", ,hat is clear is that the ISE has managed to improve both the medium and long term

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financial outlook of the institution- 'o,ever, in the short run, the ISE ,ould continue to face the same financial and competitive challenges that it has been facing in the past- 1ut, during this intervening period, the ISE is seriousl" engaged in considering the expansion of its market out reach to man" important cities of the northern region that could lead to more market activit" at the ISE- %he future of ISE is bright as economic environment and its ne, pro/ects reflect increasing revenues as more people ,ill invest in stock marketSome of them areB

Mer"er o) three Sto#$ Ex#h'n"es

%he SE9# and management of three Stock Exchanges is holding meetings to discuss merger of three Stock Exchanges- %his is a good sign for ISE since customers ,ill focus on one area and the li3uidit" of securities ,ill be more ,hich ,ill attract more investors and more companies ,ill be listed on national Stock Exchange ,hich ,ill ensure more profitabilit"- For this purpose the land is ac3uired in near the Saudi #ak %o,er #lot )O- <7<8, 4innah Avenue F-C Islamabad-

5orm'tion o) .D. 'n& C..

%he exchange implementing a plan ,ith the help of SE9# in ,hich ever" compan" ,ill bound to get membership of 9entral depositar" compan" >9D9? before August <:,577<- %his ,ill help of transparenc" in functions and increase the efficienc" in market%he formation of )99 ,ill ensure that settlement of trading takes place according to rules and regulations-

=ibr'ry Est'b!ishmentB

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%he ne, librar" in ISE is established for purpose to facilitate the investors and the general public for a,areness- )o, there is plan to have a librar" of international standard in ne, building-

.re'tin" '%'reness 'bout business o) Sto#$ Ex#h'n"e

)o, the management of ISE is planning to hire proper advertising compan" to attract people to,ards the stock market business- It has also started various programs to inform people about stock market-

S7-/ An'!ysis:
S.O% anal"sis comprises of strength, ,eaknesses, opportunities and threats-

S/REC</HS:
Strengths are characteristics of specialt" of organi ation that gives it edge over others- 1" utili ation of theses Strengths 9ompan" can achieve maximum benefits- %he" ma" be core competences of that organi ation-

5orm'tion o) .D.: %he formation of 9D9, ,hich is central depositor" compan" has enable investors

to do bu"ing and selling of shares of shares electronicall" ,hich has reduces the chances of fraud in case of private ph"sical shares in market ,hich caused troubles for ISE, investors and brokers- )o, listed companies are 3uite large and the" can onl" handled b"

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an electronic s"stem such as 9D9- %he formation of 9D9 shifted people to invest in Stock Exchange-

2 5orm'tion o) C..: %he formation of )99, ,hich is )ational cleaning compan", enables investors to pa" and receive mone" for trading of shares complexit" in shares trading and no, attraction of stock market is increase and it has given more hold to ISE management on brokers-

+ /e#hni#'! 'n& (ro)ession'! Emp!oyees: %he emplo"ees of ISE are engaged ,ith stock markets for a long time and are experienced to conduct their business and experienced- Further more the management of ISE is still striving for the best to adopt internet best practices and is ,orking for betterment of exchange-

1 .'rrier -pportunities: %he ISE higher management kno,s that its most impost assets are its emplo"ees, therefore it is constantl" ,orking to provide its emplo"ees better opportunities and gro,th in their carrier, b" providing training and giving them chances to learn- *an" emplo"ees ,ho ,ere graduates are doing masters and doing /ob in ISE- %he" ,ant to retain emplo"ees-

5 In#entives 'n& Monitorin":

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ISE management has a professional vie, and onl" those emplo"ees ,ho ,ork for betterment of organi ation are retained, the" are given various incentives, such as promotions and bonuses and increasing in their salaries if the" achieve their targets-

2 Bnity o) #omm'n&: %he structure if ISE management is centrali ed ,ith managing Director as head of ISE0s, management- %his gives organi ations one direction and one goal to achieve-

3 Ru!es o) Re"u!'tions: %he rules and regulations of ISE are its strength obe"ing these rules is compulsor", such as leaves rule, attendance and discipline, ,hich creates feasible environment-

4 7or$ 5or#e Diversity: %he emplo"ees of ISE belong to various regions and having different cultures, since ISE is ,orking in d"namic environment so it has to adopt 3uickl" ,hich is done b" variet" of ideas from these emplo"ees- 1ut handling their conflicts is also challenging-

6 Entrepreneurship: %he management of ISE is ,illing to accept ne, changes and ideas given b" members, governments and investors to improve its operations it has al,a"s ,elcomed them- 9urrent example is ISE has taken the issue of dehumani ation and merging of Stock Exchanges seriousl"-

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*0 /r'nsp'ren#y: %he vision mission and ob/ective statement of ISE include making securit" market transparent and this boosts investors confidence- ISE ensures that all information is disclosed to investors and has disclosed ton investors and has discouraged speculations-

** Is!'mi# Investment: As #akistan is Islamic countr", according to interest is prohibited- %herefore stock business is free of interest so it is a Islamic ,a" to invest and people have more faith in their profits and earnings-

*2 More Returns: %he past data sho,s that returns on investments are more than in banks and other investments so stock market is more attractive than other investments and investors can earn more in less time-

*+ S')e: %he investment in Stock Exchange is safer since ISE ensures the investors investments are safe guarded and proper rules are developed for it-

7EA;CESS

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%he ,eaknesses are internal factors ,hich hinder the ,orking of organi ation and give competitotors edge- Some ,eakness of ISE reali e b" me are

7or$ Done In Bui!&in" ISE is currentl" ,orking in leased building- It is four stories building in ,hich

construction ,ork is in process ,hich gives investors a bad impression and the management of ISE can0t perform at best level-

Sm'!! Are' %he area of ISE in current building is ver" less as compared to that needed- %his

creates man" problems files are spread on tables and emplo"ees are ,orking closel" ,hich gives them insecurit"- %his problem ,ill be handled b" shifting to the ne, building

Short'"e -) Emp!oyees #resentl" the strength of emplo"ees in ISE is ver" less as compared to ,ork done b"

the organi ation- %his creates burden on emplo"ees and the" can0t perform their ,ork properl"- So more emplo"ees must be recruited to enable ISE to perform at its peak-

=ess .ontro! -n Bro$ers One of the ma/or resources of revenue of ISE is fees received from brokers such

as exposures fees and rule bound trading of shares b" brokers and agents ,ho are

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registered in SE9# but some reports are there that unauthori ed people are trading shares%o control this ISE should improve s"stem-

5 Mess ISE should have a mess have of it0s o,n to entertain emplo"ees and guest to reduce ,astage of time-

('r$in" As a most cases buildings in 1lue Area don0t have proper parking ,hich is cause of

disturbance for management as the" face difficult" b" police

=ess S'!'ries %he emplo"ees of ISE are paid less as compared to their ,ork- %o ensure the

retention of emplo"ee ISE must think of increasing their salaries for emplo"ees

5orm'!i:e& Due to the formali ed s"stem the emplo"ees are facing difficulties in contacting the

upper 'ierarch"- %hus it is also one of the demerits of the ISE

=e"'! ='%s Some la,s imposed b" the federal government such as labour la,s of firing

inactive emplo"ees is big ,eakness for ISE-

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*0 .oor&in'tion =ess coordination bet,een different exchanges has become a ,eakness and the" can0t act on platform-

** /'xes %axes imposed b" the government such as capital valued based tax and other taxes are becoming ,eakness-

*2 Co 5orm'! HR Dep'rtment One of the demerits of ISE management is that the" don0t have formal '$ management Department- %herefore it is time of need to make a proper '$ management Department and monitor the performance of emplo"ees, their attendance and monitoring an" deviation bet,een actual-

-pportunities:
Opportunities are positive trends in external environment their effective utili ation can result in improvement of organi ation-

* E#onomi# .on&itions: %he economic conditions of #akistan are improving as a result more people are investing in stock exchange and index of all stock exchanges is improving- %he favorable

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economic conditions pro/ect opportunities for ISE as more companies ,ill invest and more people ,ill engage themselves in the business of shares trading-

2 <overnment: %he #rime *inister of #akistan *r- Shaukat A i is *1A form I1A and ,as former emplo"ee in 9I%& bank- 'e ,as also former minister of finance and has solid kno,ledge of business and econom" because of his attention to stock market the condition of stock market is improving da" b" da"- %here ,ill be more investment opportunities for investors and thus revie, of stock exchange ,ill improve-

+ A&vertisement: 9urrentl" people in #akistan don0t have much kno,ledge about ho, to invest in stock market and ,hat are the formalities of stock exchange- %he" are una,are of past statistical data to make decision about investing in stock exchange- 1" guiding people more and more the" ,ill learn ho, to invest in stock exchange-

1 E!imin'tion o) BAD=A: %he process for elimination of carr" over transaction s"stem >1AD=A? ,ill have great impact over the future outlook of the stock markets in #akistan although this s"stem has some merits like eas" availabilit" of mone" at comparative rates but the 1AD=A are far more- *ost of the times this factor has a sheer role to destabili e stock market in the past- %he 1AD=A also proves to be an impediment for the gro,th of ISE market and causes for shifting volumes from ISE to more li3uid bourses-

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%he pre-trading margin-financing mode through banking channels ,hould brings stabilit" in the market-

5 Ru!es o) SE.(: %he SE9# has allo,ed trading in futures to 5E scrips thereb" raising the maximum limit of number of scrips from :8 and it is expected that the future market ,ould prove to be a real substitute of 1AD=A for hedging purposes-

2 5in'n#i'! He'!th: As regards the financial health of institution it is the matter of satisfaction and gratitude for all of us that for the first time for the past man" "ears that exchange has accumulated a surplus and all successive loses have vanished%he exchange has earned record revenue of 6A-C million ,hich ,as 5:G higher to as compared to last "ear-

3 Mer"er o) A!! Sto#$ Ex#h'n"es: %he regulator" authorit" SE9# is considering integrating all three stock exchanges into national market- It is an opportunit" for ISE because to trading of shares ,ill increase and more companies ,ill be attracted and investors ,ill be focused of one area4 5orm'tion o) South Asi'n 5e&er'tion o) Ex#h'n"es: )o, it is decided that south Asian federation of exchanges ,ill be open in Islamabad- %his ,ill make trading of shares across boundaries therefore more companies

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,ill be listed and more revenue ,ill be received- %his development ,ill take long period and ne, and complex rules ,ill formulate-

6 E!e#troni# System: )o, the trading of shares is done b" electronic s"stem and shares are rarel" traded in ph"sical form- %his is because of formulation of )D9 and 9D9- %his has made share trading more easil" feasible and attractive- %he management also finds it eas" %he investors have more confidence in investing in ISE as there are more securit" measures to safe guard their investments-

*0 Dyn'mi# or"'ni:'tion %he management of ISE is al,a"s ,illing to accept changes brought b" SE9# and tr" its best to solve conflicts of investors and brokers- It is al,a"s changing according to the needs-

** Diversi)i#'tion: ISE is considering dealing in diversified securities and financial products to attract invertors giving them alternatives to invest- %his ,ill open ne, gates to ISE-

*2 Ce% Bui!&in": ISE is constructing ne, building in 1lue Area, .hich has 56 stories and is called KISE %o,ersL

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After the completion of this pro/ect more revenues ,ill be coming to ISE in form of Annual =isting fees and advance from booking- It is a huge investment ,hose returns are expected to be high-

*+ -ther Investments: %he other investments in market are giving less return because interest given is lo, as compared to returns gained from investments in stock exchange and inflation is lo,-

/hre'ts
%hreats are negative trends in external environment in ,hich an organi ation is ,orking- %he" must be carefull" dealt some threats for ISE ,here

* SE.(DS Ru!es %axes imposed b" the government such as capital valued based tax and other taxes are becoming threat and people ,ill shift to,ards other investments-

2 =ess Sh're %he share of ISE in activit" of all markets of #akistan is ver" less as compared to other markets such a +SE and ISE- %herefore the role of ISE in stock market is less, onl" shares of :7 or less companies is traded- *easures must be taken to increase the share of ISE-

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+ Expenses Expenses of exchange increased slightl" as compared to past rear-

1 Mer"er %he future faith of ISE is dependent on decision of SE9# and other exchanges ,hether the" ,ill go for demutuali ation or integration- In case of integration ISE ,ill lose its status and its emplo"ees ,ill have to fight for their /obs and different regulations ,ill be imposed- In case of demutuali ation ISE ,ill have to go for diversification-

5 5orm'tion o) SA5E .ith formation of SAFE, the attraction of ISE ,ill decrease and competition ,ill increase people ,ill have alternatives to invest into- %he rules ,ould be changed and foreign countries ,ill have influence on functioning of safe-

2 Ce% Bui!&in" 'uge amount of mone" is invested in ISE %o,ers ne, building of ISE- %he feasibilit" report made b" I/a and %abasam has some assumption making this report and predicting the future of ISE- If the econom" condition change cash flo,s ,ill change and this ,ill affect feasibilit" of pro/ect-

3 =e"'! ='%s %he la,s of companies ordinance and labour la,s are threat to ISE because the" can not fire their emplo"ees- %he" have right to challenge their filling in court-

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4 =o#'tion %he location of ISE is in Islamabad ,hich is not that much centre of business activit" and most companies have their head 3uarters in +arachi- %herefore have advantage to be listed in +arachi, because expenses for transporting material ,ill be less in +SE and trading volume of +SE is more- %herefore the" don0t like to take burden of distributing report and ,riting letters-

6 =i0ui&ity %he li3uidit" of investments is ver" important factor in considering investments in stock exchange a stock exchange in ,hich more shares are traded has more li3uid securities- %herefore securities are more li3uid in +SE than in ISE- Especiall" the elimination of badla ,ill make li3uidit" of transactions less as compared to present

*0 Spe#u!'tions Speculations are biggest threat to stock market- %hese speculations can change the prices of securities in minutes- %herefore investors hesitate to invest ,hen the" see that losses are encountered ,hen speculations are done-

** In#ome

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According to an estimate the member of people ,ho are belo, average are increasing ,hich is negative sign for ISE because, people don0t have mone" to invest in stock market, therefore the stock market ,ill be not efficient-

*2 =o% S'!'ries %he salaries of emplo"ees of ISE are less ,hich ,ill cause shifting of emplo"ees to other sectors- During merging man" emplo"ees ,ill have to do golden handshake%hus to retain emplo"ees some thing must be done

*+ ('per Re#or& %he organi ation has to keep record on paper for proof purposes therefore it is threat to ISE in terms of ,astage of time S resources-

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.on#!usions
%he results of current "ears financial statements sho, that the performance of ISE good and it has got rid of its accumulated losses ,hich mainl" because of cost of ne, pro/ects such as building of ISE- %he number of listed companies and ISE :7 index improved%he management of ISE is hard ,orking and skilled the" are most important asset of organi ation- %he foreign investment is also a good sign and merger of three stock exchanges and formation of national stock exchange ,ill open ne, doors for ISE- %he introduction of electronic s"stem of trading shares and development of ,eb site of ISE is another bright aspect- %he share of ISE in stock markets of #akistan is ver" less and turnover is ver" less- %he trading is mainl" done in shares of :7 or less companies%he ISE should have a proper human resource department to recruit ne, emplo"ees and observe the performance of current- %he elimination of deep routed s"stem of badla transactions ,ill take time and ,ill be difficult- %here should be proper a,areness created among people b" advertising and informing them about stock business- .orking in ISE ,as a great experience, the management of ISE ,as ver" cooperative and there ,as so much to learn that I ,as not able to understand all things but I have tried m" best to learn ver" bit of it-

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