KARACHI STOCK EXCHANGE

PRESENNTED BY
Muhammad BILAL
Ramzan khan

DEPARTMENT OF
COMMERCE
UNIVERSITY OF SARGODHA
WWW.UOS.EDU.PK

INTRODUCTION
The Karachi Stock Exchange (KSE), Pakistan's largest and
most liquid Stock Exchange.
The Karachi Stock Exchange (KSE) is the premier stock
exchange of the country.
KSE provides a liquid and efficient digitized
marketplace where investors meet directly to buy and
sell listed companies' common stock and other
securities.

For over 60 years, the KSE has facilitated capital

formation, serving a wide spectrum of
participants, including individual and
institutional investors, the trading community
and listed companies.
KSE offers companies and investors an efficient
and transparent securities market for raising
capital and achieving investment objectives.

KSE remains the pioneer of Pakistan's Capital

Market Developments by introducing new
products, constantly upgrading technology
infrastructure through partnerships with the
world's leading technology companies and
through the continuous assessment and
improvement of services, catering to every
segment of customers' needs.

Registered Office
The Registered Office of the Exchange will be
situated in Karachi.

HISTORY
The Karachi Stock Exchange (KSE) was
established on Sep 18, 1947
The Karachi Stock Exchange (KSE) was
incorporated in March 10, 1949
as a Company Limited by Guarantee.
Started with the 5 companies with a paid-up
capital of Rs. 37 million.
The first index was the KSE 50 index.

With growth in number of listed companies and

trading activities, a dire need for a true
representative index and computerization of
trading activities was felt. As a result KSE 100
Index was introduced on November 1, 1991.

KATS
Computerized trading system called Karachi
Automated Trading System (KATS) was
introduced in 2002 with a capacity of 1.0 million
trades per day and the ability to provide
connectivity to an unlimited number of users.

In 1995, the need was felt for an All share index

to reconfirm the KSE-100 and also to provide
the basis of index trading in future. By August
29, 1995 the KSE-All Share Index was
constructed which became operative on
September 18, 1995.
To address the needs of investor community
two other indexes were also introduced later on
called KSE 30 Index and KMI 30 Index.
Karachi Stock Exchange is located on Stock
Exchange Road, in the heart of business district
of Karachi.

Listing in KSE

As on September 26th, 2013 there are 579

companies listed in KSE and the total market
capitalization is Rs. 5,542.986 billions.
The listing is done on the basis of strict rules and
regulations laid out by Securities Exchange
Commission of Pakistan (SECP) & Karachi Stock
Exchange (Guarantee) Limited.

All the listed companies are categorized in

various main business sectors.
There are total 36 sectors listed on Karachi
Stock Exchange. Out of these, 32 sectors
contribute towards the market
capitalization and all the listed companies
(excluding their future contracts) are
divided among these. Rest of the 4 sectors
are allocated for indexes, futures bonds
etc.

VISION
To be a leading financial institution,
offering efficient, fair and
transparent securities market in the
region and enjoying full confidence
of the investors.

MISSION
To strive to provide quality and valueadded services to the capital market in an
efficient, transparent and orderly manner,
compatible with international standards
and best practices.
To provide state-of-the-art technology
and automated trading operations, driven
by a team of professionals in accordance
with good corporate governance.

To protect and safeguard the

interests of all its stakeholders, i.e.
members, listed companies,
employees and the investors at large.
To reflect the countrys economic
health and behavior and play its role
for the growth, development and
prosperity of Pakistan.

KSE POSITIONED TO BE A HUB OF

CAPITAL FORMATION IN THE
REGION
Chairman South Asian Federation of
Exchanges (SAFE)
Member Federation of Euro-Asian
Exchanges (FEAS)
Affiliate Member of the World
Federation of Exchanges (WFE)

Affiliate Member of International

Organization of Securities Commissions
(IOSCO)

Agreements with other Exchanges

Dubai Financial Market
Abu Dhabi Securities Market
Shanghai Stock Exchange

KSE CUSTOMER
Issuers (Listed Companies)
Brokers and Members
Investors

TODAY KSE

Exchanged owned by 200 members / brokers.

1850 trading terminals exist at broker end.
3 indices (KSE 100, KSE 30,
KMI 30)
Trading currently through an electronic trading
system.

Tomorrow KSE

Demutualized exchange-public listed company with

strategic investors.
Products to includes:
Index trading
Option
Swaps
New indices (e.g Sector Index)
Board base investor participation.
Increase float of existing trade companies becoming a
Regional Hub for source of capital.
Cross border listing of companies and trading of indices.

KSE FUTURE SUCCESS

KSE future success will depend on the quality of
our human resources.
A spirit of youthful energy, high intellect and
superior skills characterizes our people.
Our workforce consists of a combination of
youth and experience perfectly suitable to the
organizations current requirement and future
challenges.
KSE employs the best available human resource
from the capital market and financial industry.

Candidates are selected based on their individual energy, quick

thinking ability, confidence, decision making ability, integrity and
professionalism attributes that define the persons compatibility
with KSE culture.
The key to our long-term success is the creative genius of our
people and their drive towards excellence.
Our employees are exposed to an organizational commitment to
continuous personal and professional development.
Our people get involved in various initiatives ranging from
management skills, development and personal improvement, to
technology advancement and process enhancement.
On a regular basis, some of our best performers are selected for
our Mentoring Program, where seasoned mentors groom their
portages towards positions of greater responsibility and influence.
Promoting a performance driven culture where high
performers are recognized for their exceptional contributions.

KSE TECHNOLOGY
Our Information Technology Group forms the Core of
our Business Operations.
Development, implementation and monitoring of stateof-the-art trading system known as Karachi Automated
Trading System (KATS), introduced in 2002 with a capacity
of 1 million trades a day and unlimited number of users.

Disaster Recovery Management and Business

Continuity Programs database backups.

Software Development, Testing and

Training.
Customer Services Support.
Caters to members complaints regarding
computer network and trading systems.
Administration and Maintenance of
servers and operating systems.
Partnerships with Microsoft, Oracle and
Unisys for I.T. infrastructure.

KSE PLAY A KEY ROLE IN

PAKISTANS ECONOMY
The KSE is one of Pakistans largest tax payer
and in the fiscal year 2006- 2007 contributed
over Rs. 4 billion towards the national exchequer.
Listed Companies contribute over 10% of total
revenue collected by the Government of
Pakistan.
KSE brokers on average pay more than 50% of
their profit before tax as presumptive tax.
Our investors pay 10% tax on dividends.

LISTING REGULATIONS
OF THE KARACHI STOCK EXCHANGE
(GUARANTEE) LIMITED
ELIGIBILITY FOR LISTING
A company may be listed under these regulations
provided that: The minimum paid up capital of the company is Rs.
10 million.
The minimum public offering is Rs. 5 million or 25%
of the capital, whichever is higher.

 At the time of listing, the break-up value of the

ordinary shares of the company, duly certified by
a Chartered Accountant / Auditor shall not be
less than its face value.
The offering document has to be cleared by the
KSE before it is submitted to the Securities
Exchange Commission of Pakistan for approval.

CONDITIONS APPLICABLE FOR

LISTING OF SECURITIES
The company shall comply with the following
listing requirements:a) The Company shall apply for approval to the
Exchange.
The application shall contain the names of the
sponsors of the company, names of the directors
of the Company.

b) The company shall not be eligible for listing

under these regulations if any of its
Director / Sponsor is a defaulter of any Stock
Exchange and / or he is a Director in other
listed company which has violated and / or failed
to comply with any provision of the Listing
Regulations of the Exchange and/or has
defaulted in the payment of the loans of any
bank or financial institution or government
dues, unless the same are legitimately disputed
by him by litigation.

FEE SCHEDULE
Rates of Initial Listing Fee Payable by the
Companies with Listing Application:

(i) Initial Listing Fee

A company applying for listing on the OTC,
shall pay an initial listing fee equivalent to
one twentieth of one percent of the total
value of Security.

(ii) Annual Listing Fee:

A company shall pay, in respect of each financial
year of the Exchange, commencing from 1st July
and ending on 30th June next, an annual listing
fee, which shall be payable by or before the 30th
September in each calendar year, as per the slabs
of fee applicable to debt instruments.
A company applying for enlistment on the
Exchange shall, in addition to other fees, pay a
sum of Rs. 50,000/- (Rupees fifty thousand only)
as non-refundable service charges.

AFTER-HOURS TRADING
After-hours trading is stock trading that occurs
after the traditional trading hours of the major
exchanges,
such as the New York Stock Exchange and the KSE
Stock Market.
Since 1985, the regular trading hours in
the United
States have been from 9:30 a.m. to 4:00 p.m.

Trading outside these regular hours is not a new

phenomenon but previously was limited to high
net- worth investors and institutional
investors like mutual funds. The emergence of
private trading systems, known as electronic
communication networks or ECNs, has allowed
individual investors to participate in after-hours
trading.
After-hours trading on a day with a normal
session occurs from 4:00 to 8:00 p.m.

Trading also occurs before the traditional trading

hours and is known as pre-market trading. Premarket trading occurs from 4:00 to 9:30 a.m.
National Association of Securities Dealers (NASD)
members who voluntarily enter quotations
during the after-hours session are required to
comply with all applicable limit order protection
and display rules (e.g., the Manning rule and the
SEC order handling rules).

Trading System
The KSE has introduced as state of the art computerized
trading system known as Karachi automated trading
system to provide a fair , transparent an deficient and
cost effective market for the investors.
The trading is divided into four distinct segments, each of
which has its own clearing and settlement procedure.
These are:
T+3
Provisionally listed companies
Spot (T+1)
Transactions and future contrasts

T + 3 Counters
T + 3 Counters
Transactions in this segment are settled through the clearing
and settlement? NNCPL that nets out the purchases and sales
and the financial obligations theory of each member/firm for
the notified clearing period.
Payment from and to members are routed through the 8
clearing & settlement/ NNCPL.
For the securities declared eligible securities by the
central depositary company the clearing and settlement takes
place through NNCPL in order to handle the clearing of all the
three stock exchanges of the county under one roof,
the national clearing and settlement system has been
introduced. NNCPL is managed by central depositary company
of Pakistan limited.

Futures Trading in
Provisionally Listed Companies
The shares of companies which make a minimum public offering of
Rs.150 million are
traded on this segment from the date of publication of offering
documents.
The period of contracts of each script is notified by the exchange.
The outstanding contracts carried out under the provisionally listed
companies are settled on the settlement date and members are not
allowed to transfer their positions to the ready clearing board or any
other board.
On formal listing, the trading in the shares of the company is shifted
to the ready board
counter under T+ 3 settlement system from the dates of normal
listing.

Spot / T+1 Transaction

Spot / T+1 Transaction
For about 5 days before the closure of shares transfer book notified
by the company for any corporate action, transactions are settled on
T+ 1 basis.

For non-CDC securities the delivery and payment is settled through

the clearing house of the exchange, however, delivery is tendered
directly between the buying and selling members as per the
instructions of the clearing house, however the delivery is tendered
directly between the buying and selling members as per the
instructions of the clearing 7 settlement.
The transactions in CDC eligible securities are settled through NCCPL.

Future Contracts
A future contract involves purchase and sale of securities at some
future date (normally within one calendar month) at a price foxed
today.
The number and names of companies to be traded on the futures
counter are determined every six months based on the eligibility
criteria approved by SECP in this regard ad which are notified to the
market participants in advance. Under the regulations governing
future contracts and the contract is fixed for a period of one month
transaction costs. Brokerage on transactions is freely
negotiable between the negotiator and the client.
Stamp duty is charged at 1.5% of the face value of the shares under
the physical form of transfer.
There is no stamp duty for transfer settled through the central
depositary system; however, there is a one time stamp duty at the
rate of one paisa per share at the time of deposit of securities in the
CDS. The stamp duty is born by the buyer ad the seller.

Market Indexes
KSE 100 Index
KSE-All Share Index

KSE 30 Index
KMI Index

History KSE100 index

Introduced at 1st November 1999 with base value of 1,000 points.
100 companies selected on the basis of sector representation and
highest market capitalization.
Captures over 80% of the total market capitalization.
Out of the following 35 Sectors, 34 companies are selected i.e. one
company from each sector (excluding Open-End Mutual Fund Sector)

LIST OF SECTORS
1.

Open-end Mutual Funds

19. Oil & Gas Marketing Companies

2.

Close-end Mutual Funds

20. Oil & Gas Exploration Companies

3.

Modarabas

21. Engineering

4.

Leasing Companies

22. Automobile Assembler

5.

Investment Banks/Investment
Cos./Securities Cos.

23. Automobile Parts & Accessories

6.

Commercial Banks

24. Cable & Electrical Goods

7.

Insurance

25. Transport

8.

Textile Spinning

26. Technology & Communication

9.

Textile Weaving

27. Fertilizer

10. Textile Composite

28. Pharmaceuticals

11. Woollen

29. Chemical

12. Synthetic & Rayon

30. Paper & Board

13. Jute

31. Vanaspati & Allied Industries

14. Sugar & Allied Industries

32. Leather & Tanneries

15. Cement

33. Food & Personal Care Products

16. Tobacco

34. Glass & Ceramics

17. Refinery

35. Miscellaneous

18. Power Generation & Distribution

STOCK SELECTION RULES

Rule # 1
Largest market capitalization in each of the 34 Karachi Stock Exchange
sectors excluding Open-end Mutual Fund Sector;

Rule # 2
The remaining index places (in this case 66) are taken up by the
largest market capitalization companies in descending order.

Rule # 3
Company which is on the Defaulters Counter and/or its trading is
suspended, declare Non-Tradable (i.e. NT) in preceding 6 months
from the date of decomposition shall not be considered in the
decomposition of KSE-100 Index.

Objective KSE100 index

The primary objective of the KSE100 index is to have
a benchmark by which the stock price performance
can be compared to over a period of time. In
particular, the KSE 100 is designed to provide
investors with a sense of how the Pakistan equity
market is performing. Thus, the KSE100 is similar to
other indicators that track various sectors of the
Pakistan economic activity such as the gross national
product, consumer price index, etc.

KSE-All Share Index

In 1995, the need was felt for an all share index
to reconfirm the KSE-100 and also to provide the
basis of index trading in future. By August 29,
1995 the KSE-All Share Index was constructed
which became operative on September 18,
1995.
Similar to KSE 100 Index, KSE ALL Index is also
calculated using market capitalization method.

KSE 30 Index:
The primary objective of the KSE-30 Index is to
have a benchmark by which the stock price
performance can be compared to over a period of
time. In particular, the KSE-30 Index is designed to
provide investors with a sense of how large
companies' scrips of the Pakistans equity market
are performing. Thus, the KSE-30 Index will be
similar to other indicators that track various
sectors of countrys economic activity such as the
gross national product, consumer price index, etc.

KSE-30 Index is calculated using the FreeFloat Capitalization methodology.

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

KMI 30 Index
Introduced in Spetember 2008, the
objective of KSE-Meezan Index (KMI) is to
serve as a gauge for measuring the
performance of Shariah compliant equity
investments. Besides tracking performance
of Shariah compliant equities, its
construction will increase investor trust
and enhance their participation.
KSE-Meezan Index is also calculated using
the Free-Float Capitalization.

CALCULATION METHODOLOGY

RECOMPOSITION OF THE KSE-100 INDEX

Semi-annual recomposition process.
Sector Rules

Time-based rule
Value-based rule

Market
Capitalization
Rules

Time-based rule

Rules for new issues

AN EXAMPLE OF THE RECOMPOSTION OF THE KSE100

All divisor adjustment are made after the close of trading.

REPLACEMENT OF STOCK IN THE INDEX

REPLACEMENT OF STOCK IN THE

INDEX