Pakistan Stock Exchange Assignment.docx

Pakistan Institute of Quality Control
Assignment on
Submitted By: Sonam Gulzar (Roll No. M-HRM-F19-0002)
SubmittedTo: Prof. Dr. Salman Masood Sheikh

Contents
Background and History of Pakistan Stock Exchange......................................... 4
Main Objective.................................................................................................. 4
“Anchor Investor”.............................................................................................. 6
“Applicable Law”............................................................................................... 6
“Blocked Account”............................................................................................. 7
“CDC”................................................................................................................ 7
“Closing Date’’ .................................................................................................. 7
”Divestment Committee” .................................................................................. 7
”Equity Stake”................................................................................................... 7
“Exchange” ....................................................................................................... 7
Pattern of Shareholding .................................................................................... 8
Karachi Stock Exchange..................................................................................... 8
Registration ...................................................................................................... 9
Certificate of Incorporation on Change of Name.............................................. 10
Lahore Stock Exchange.................................................................................... 10
Islamabad Stock Exchange .............................................................................. 11
Merger............................................................................................................ 12
Owner:......................................................................................................... 12
Location:...................................................................................................... 12
Hierarchy/Organogram of Pakistan Stock Exchange........................................ 12
Who are the brokers?...................................................................................... 13
How they work?.............................................................................................. 13
How the index moves? .................................................................................... 13
What it means by 100 indexes?....................................................................... 13

How securities are registered and traded in the stock exchange? .................... 14
What is trading in and trading out?................................................................. 14
How biding takes place etc.?........................................................................... 14
Furthermore, any important information you want to share?.......................... 14
What are the requirements for an initial public offering? ................................ 14
What are the procedures of an initial public officer?........................................ 15
Who does what in an initial public officer?...................................................... 15
The company partners..................................................................................... 16
What is the cost of an initial public officer? ..................................................... 16
KEY TAKEAWAYS............................................................................................. 17

Background and History of Pakistan Stock Exchange
Pakistan Stock Exchange was established on September 18, 1947 and was formally
incorporated on March 10, 1949 under the name of ‘Karachi Stock Exchange’, as a
Company limited by Guarantee. In October 1970, a second stock exchange was
established in Lahore to meet the stock trading needs of the provincial metropolis.
In October 1989, Islamabad Stock Exchange was established to cater to the
investors of the northern parts of the country. Because the three exchanges had
separate management, trading interfaces, indices, and had no mutualized structure,
therefore the Stock Exchanges (Corporatization, Demutualization and Integration)
Act, 2012 was promulgated by the Government of Pakistan which ultimately
resulted in the three exchanges integrating their operations effective January 11,
2016 under the new name ‘Pakistan Stock Exchange Limited’ (PSX)
The Karachi Stock Exchange, Lahore Stock Exchange and Islamabad Stock
Exchange, In there were about 443 companies listed in PSX with a total market
capitalization of PKR 8,736 billion (USD$52 billion).
Main Objective
To continue to function as a stockexchange with all its existing assets
and liabilities upon conversion from a company limited by guarantee to
a company limited by shares in pursuance of the provisions of Stock
Exchanges (Corporatizations, Demutualization & Integration) Act,
2012.
To assist, regulate or control the business of buying, selling and dealing
in Securities (hereinafter referred to as the "Trade") and to maintain or
provide a market place or facilities for bringing together buyers and
sellers of securities or for otherwise performing with respect to
securities the functions commonly performed by a stock exchange.
To admit Securities to dealing on the Exchange or to otherwise permit
Securities to be dealt with on the Exchange.
To facilitate, promote, assist, regulate and manage in the public interest,

with a high standard of integrity and honor, dealings in Securities of all
kinds and all other instruments of any kind including but not limited to
money market instruments, and to ensure trading in a transparent, fair
and open manner with access to investors from areas in or outside
Pakistan. The term “Securities” shall mean shares of various classes
issued by companies and statutory corporations, scrips, Term Finance
Certificates, Sukuk Certificates (Sharia Compliant Bonds), bearer and
registered bonds, Bonds including Federal Investment Bonds (FIBs),
Pakistan Investment Bonds (PIBs) and Bonds issued by Federal and
Provincial Governments, local authorities, statutory bodies, statutory
corporations, etc., Foreign Currency Bonds, etc.,
Certificates of Investment, Units issued by Collective Investment
Schemes and Real Estate Investment Trusts including shares in or
securities of an investment company or units in or securities of a trust
fund (whether open-ended or closed end), Treasury Bills, Commercial
Papers, money market instruments and equity based Derivatives
(options, swaps etc.), Participation Term Certificates, Modaraba
Certificates, Musharaka Certificates, Government papers,
Depository Receipts of all kinds issued by foreign institutions
(including Global Depository Receipts and American Depository
Receipts) and other equity based and debt based instruments of all
kinds, issued by any Pakistani or foreign companies or corporations,
including Federal, Provincial and Local Governments and allowed to be
traded at the stock exchanges, both in physical form as well as scripless
securities and shall include book-entry Securities as defined under the
Central Depositories Act, 1997.
To provide specialized, advanced, automated and modern facilities for
trading, clearing and settlement of securities which may include but
shall not be limited to providing facilities for buying, selling and
trading in Securities by electronic means, including electronic transfer
deliveries and confirmations (electronic trading) and to providing
computer terminals to the Trading Right Entitlement (TRE) Certificate
Holders, passwords, pin codes and other computerized facilities for
facilitating electronic trading by TRE Certificate Holders.

To initiate, facilitate and undertake all steps of all such activities in
relation to stock exchange, money markets, securities markets and
capital markets, as are required for better investor service and
protection, including but not limited to, taking measures for ensuring
greater liquidity (both in terms of breadth and depth of securities) for
the investor, providing easier access to the Exchange, facilitating inter-
market dealings and generally to facilitate transactions in securities in a
cost effective, expeditious and efficient manner.
To support, develop promote and maintain a healthy market in the best
interests of the investors and the general public and the economy and to
introduce high standards of professionalism among registered market
participants and with investors and the capital, financial and money
markets in general.
PAKISTAN STOCK EXCHANGE LIMITED
In these Articles of Associations unless repugnant to the context or
meaning thereof:
“Act” means the Stock Exchanges (corporatization, Demutualization
and Integration) Act, 2012
“Anchor Investor”
The purpose of these Articles means the consortium comprising China Financial
Futures Exchange, Shanghai Stock Exchange, Shenzhen Stock Exchange, Pak
China Investment Company Limited and Habib Bank Limited and any other entity
forming part of such consortium holding not less than 40% shares of the Exchange,
as per the Regulations.
“Applicable Law”
includes the Companies Ordinance, the Act, the Securities Act, the
Electronic Transactions Ordinance, the Share Capital Rules and such

other laws and rules and regulations, made or to be made under the law,
As may be applicable to the Exchange from time to time.
“Blocked Account”
Means the CDC account opened and maintained by the Exchange in
terms of the Act.
“CDC”
Means the Central Depository Company of Pakistan Limited
established in pursuance of the Central Depositories Act, 1997
“Closing Date’’
Means the date agreed between the Anchor Investor and Divestment
Committee of Exchange under terms of Share Purchase Agreement on
which Closing takes place.
”Divestment Committee”
Means a Committee constituted by the Commission under the
Regulations.
”Equity Stake”
Means 40% of total ordinary shares of Exchange out of ordinary shares
lying in the blocked account of Exchange pursuant to Section 5(1)(c) of
the Act, acquired by Anchor Investor and transferred in the name of
Consortium members of Anchor Investor.
“Exchange”
Means Pakistan Stock Exchange Limited.

Pattern of Shareholding
PSX constitutes of 40% shareholding by a consortium of Chinese investors
(Shanghai Stock Exchange, Shenzhen Stock Exchange, & China Financial Futures
Exchange), and 60% by general public, which includes initial shareholders, local
and foreign investors.
Karachi Stock Exchange
Founded on 18 September 1947, Karachi Stock Exchange Limited (KSE) was
registered in Pakistan. The Karachi Stock Exchange Limited (KSE), was a stock
exchange located at the Stock Exchange Building (SEB) on Stock Exchange Road,
in the heart of Karachi's Business District, I. I. Chundrigar Road, Karachi, Sindh
Province of Pakistan.[15] It was Pakistan's largest stock exchanges. Karachi Stock
Exchange was also listed among 10 best stock markets in the world in
2015.[16][17] According to Bloomberg, the Pakistani benchmark stock market
index is the third-best performer in the world since 2009.[18] In June
2015, Khaleej Times reported that since 2009, the Pakistani equities delivered 26
percent a year for US dollar investors, making Karachi the best-performing stock
exchange in the world.

Registration

Certificate of Incorporation on Change of Name
Lahore Stock Exchange
Lahore Stock Exchange is located in Lahore, Pakistan. It was amalgamated into the
national Pakistan Stock Exchange on 11 January 2016. The Lahore Stock

Exchange (Guarantee) Limited came into existence in October 1970, under the
Securities and Exchange Ordinance of 1969 by the Government of Pakistan in
response to the needs of the provincial metropolis of the province of Punjab. It
initially had 83 members and was housed in a rented building in the crowded Bank
Square area of Lahore.
IslamabadStock Exchange
Islamabad Stock Exchange or ISE was the youngest of the three stockexchanges of
Pakistan and is located in the capital of Pakistan. Islamabad stock exchange (ISE)
was incorporated as a guarantee-limited company on 25 October 1989 in
Islamabad. ISE tower is a 22-storey building, which makes it the second highest
building of Islamabad after the Telecom Tower. Area covered by the building is
562,629 sq ft (52,269.9 m2), it consists of three levels of basements and ground
plus 18 floors above.

Merger
PSX was launched on 11 January 2016. Prior to the formal launch, the Karachi
Stock Exchange held a two-day pre-production mock trading session for all
certificate holders of the three bourses. The integration is expected to help reduce
market fragmentation and create a strong case for attracting strategic partnerships
necessary for providing technological expertise and assistance. The integration of
the three exchanges has completed the second phase of the Stock Exchanges
Demutualization and Integration Act 2012, passed by a joint session of parliament
Owner: China Financial Futures Exchange ...
Location: Karachi, Pakistan
Hierarchy/Organogramof Pakistan Stock Exchange

Who are the brokers?
That Is a Broker? Brokers—also known as trading members—perform a vital
function in the stock market. They execute transactions such as the buying and
selling of stocks on behalf of their clients. In return for this, they charge a
brokerage commission.
How they work?
What do stockbrokers do? Stockbrokers serve as intermediaries between markets
(e.g. exchanges) and the investing public. Brokers take order from customers and
try to fill them at the best price possible. In return, they earn a fee known as a
commission.
How the index moves?
An index moves as its constituents move whether they are market caps,
fundamentals, or just the prices of the stocks. The method used to calculate the
index can also lead to different results. Indices rates are influenced by a few things,
mainly: The index constituents.
What it means by 100 indexes?
The KSE-100 Index is a stock index acting as a benchmark to compare prices on
the Pakistan Stock Exchange (PSX) over a period.
In determining representative companies to compute the index on, companies with
the highest market capitalization are selected. However, to ensure full market
representation, the company with the highest market capitalization from each
sector is also included.

How securities are registered and traded in the stock
exchange?
An investor or stake holder have to trade through registered brokers/brokerage
houses of the stock exchanges and it doesn't require the direct involvement of the
company. Each stock exchange has a number of brokers/brokerage houses which
are registered with the commission.
What is trading in and trading out?
The most common way of buying/selling shares in stock market is via trading
through exchanges, where buyers and sellers meet and decide on a trading price.
The other means of exchange is virtual and is carried out via a network of
computers where trading can be done electronically.
How biding takes place etc.?
Bidding performs in two ways online: unique bidding and dynamic bidding.
Unique bidding: In this case bidders place bids that are global unique bids which
mean that for the bid to be eligible, no other person can place the bid in this
amount and the biddings are usually secret.
Furthermore, any important information you want to
share?
Look for the company's price-to-earnings ratio—the current share price relative to
its per-share earnings. A company's beta can tell you much risk is involved with a
stock compared to the rest of the market. If you want to park your money, invest in
stocks with a high dividend.
What are the requirements for an initial public offering?

There are regulatory requirements that must be followed for a company to do an
IPO. These requirements include filing a registration statement, preparing a
prospectus and applying to be listed on a stock exchange. An initial step, however,
is choosing an investment firm to be the underwriter.
First, you'll need to meet at least one of the following eligibility requirements for
participating in an IPO: Either $100,000 or $500,000 in household
assets (depending on the IPO; this amount excludes institutional or annuity assets,
such as 401(k), 403(b), and annuity contracts)
What are the procedures of an initial public officer?
Underwriters present proposals and valuations discussing their services, the best
type of security to issue, offering price, amount of shares, and estimated time
frame for the market offering. The company chooses its underwriters and formally
agrees to underwrite terms through an underwriting agreement.
Step 1: Choose an IPO Underwriter. ...
Step 2: Due Diligence. ...
Step 3: The IPO Roadshow. ...
Step 4: IPO Price. ...
Step 5: Going Public. ...
Step 6: IPO Stabilization. ...
Step 7: Transition to Market Competition.
Who does what in an initial public officer?
Definition: Initial public offering is the process, by which a private
company can go public by sale of its stocks to general public,

An initial public offering (IPO) refers to the process of offering shares of a private
corporation to the public in a new stock issuance. Companies must meet
requirements by exchanges and the Securities and Exchange Commission (SEC) to
hold an IPO
The company partners
The term 'partner' refers to a senior position within a consulting or financial
services firm such as KPMG or Deliotte. Traditionally, firms were set up as legal
partnerships in which partners shared the profits. The name has remained even
though many firms are now incorporated as companies.
What is the cost of an initial public officer?
For an operating company, the average cost of doing an IPO is around $750,000. It
takes 18 months. Over half the private companies that decide to go public with an
IPO abandon the process before they become a public company. In a Spinoff, the
public company sponsor pays your costs.
An initial public offering (IPO) is the process by which a privately-owned
enterprise is transformed into a public company whose shares are traded on a stock
exchange. This process is sometimes referred to as "going public." After a private
company becomes a public company, it is owned by the shareholders who
purchase its stock.
Many investors who participate in IPOs are not aware of the process by which a
company's value is determined. Before the public issuance of the stock, an
investment bank is hired to determine the value of the company and its shares
before they are listed on an exchange.
As an investor, it can be challenging to analyze a company with a stock that is
newly issued and that has not been traded previously on an exchange. But smart

investors can try to understand a company's financials by looking at
its registration documents and assessing the company's financials in order to
determine if the stock is priced appropriately. In addition, understanding the
various components of how an investment bank conducts a company's IPO
valuation is important for anyone interested in becoming an early investor.
KEY TAKEAWAYS
In addition to the demand for a company's shares, there are several other factors
that determine an IPO valuation, including industry comparable, growth prospects,
and the narrative of a company.
Sometimes the actual fundamentals of a business can be overshadowed by its
marketing campaign, which is why it is so important for early investors to review a
company's financial statements; part of the process of launching an IPO is that
companies are required to produce balance sheets, income statements, and cash
flow statements for the public.
One challenge of investing in IPOs is that the companies usually don't have a long
history of disclosing their financial information and they don't have an established
trading history, so analyzing those using conventional methods can be impossible.

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