The document provides a comprehensive overview of stock exchanges, explaining their definitions, types (money market and capital market), and the trading process. It details the history, functions, participants, methods of trading, advantages, disadvantages, and various types of orders in stock exchanges, including speculation and market factors influencing stock prices. Additionally, it highlights the structure and evolution of stock exchanges in both India and Pakistan.

1. Stock Exchanges
Muhammad Ramzan Mehar

2. Market
 A public place where buyers and sellers make transactions,
directly or via intermediaries. Also sometimes means the stock
market.
 A market is a public place where provision and object are
exposed for sale.
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3. Types of Market
There are two types of Market as following :
 Money Market
 Capital Market
 Primary Market
 Secondary Market
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4. Money Market:-
In finance, the money market is the global financial market for short-
term borrowing and lending. It provides short-term liquidity funding
for the global financial system. The money market is where short-
term obligations such as Treasury bills, commercial paper and
bankers‘ acceptances are bought and sold.
Capital Market -- The market for relatively long-term (greater than one
year original maturity) financial instruments.
Types- -
Shares, Bonds/TFCs
Types of Capital Markets
Primary Market -- A market where shares or TFCs are
bought and sold for the first time (a “new issues” market).
Secondary Market- “Secondary markets are those where
already issued shares are bought and sold”
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5. What is Stock Exchange?
 A stock market or equity market is a public entity for the
trading of company stock (shares) and derivatives at an
agreed price; these are securities listed on a stock
exchange as well as those only traded privately.
 A stock exchange is… An organized marketplace used for
trading. Where brokers and dealers buy and sell stocks of
publicly traded companies on investor’s behalf.
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6. History
 The first Stock Exchange (S.E) came to operation in
Scandinavian countries, followed by European countries.
 Later on London became the leader because of the British
Empire.
THE BIGGEST STOCK EXCHANGE: The Wall Street in New
York, USA is the biggest S.E of the world, was established in
1792.
HISTORY IN SUBCONTINENT: East India Company started this
business in India.
 The leading S.E in India was established in 1850.
 Eight S.Es in India, 2 each in Bombay, Calcutta and
Ahmedabad and 1 each in Madras and Lahore.
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7. History count…
 A look at history First Official Stock Exchange
Amsterdam Stock Exchange Oldest Stock Exchange
in Asia.
 Bombay Stock Exchange Limited Oldest Stock
Exchange in India.
 Karachi Stock Exchange in Pakistan.
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8. Major Stock Exchanges:
 New York Stock Exchange(NYSE- USA)
 Toronto Stock Exchange(Canada)
 Amsterdam Stock Exchange
 London Exchange
 Singapore Exchange
 Tokyo Stock Exchange
 Hong Kong Stock Exchange
 Bombay Stock Exchange(BSE- India)
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9. Functions of Stock Exchanges
 Raise Capital for Businesses
 Ready Market
 Mobilisation of Savings for investment
 Facilitating Company Growth
 Distribution of Wealth
 Improve Corporate Governance
 Creating investment Opportunities for small
investors
 Create Employment Opportunities
 Provides a physical location for buying and
selling securities
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10. Methods of Trading in Stock
Exchange
 Specialists
 Floor Brokers
 Stockbrokers/Financial Advisers
 Day Traders
 Casual Traders
 Online Trading
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11. Factors Affecting Stock Exchange
 Economic Factors
 Inflation And Deflation
 Interest Rates
 Foreign Markets
 Market Factor
 Demand AND SUPPLY
 Market Cap
 News
 Earning/Price Ratio
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12.  Opportunities & Better returns
 Pronounced risk factor
 Speculation, rumours and news orientation
 Diverse type of participants
 Connectivity with other financial markets
 Dependence on commodity move
 Fiscal, monitory and taxation policy effects
 Sector performance and incentives by government
Features of stock market
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13. Advantages of Stock Exchange
 giving access to new capital to develop the business
 making it easier for you and other investors - including venture
capitalists - to realise their investment
 allowing you to offer employees extra incentives by granting
share options - this can encourage and motivate your
employees to work towards long-term goals
 placing a value on your business
 increasing your public profile, and providing reassurance to
your customers and suppliers
 allowing you to do business - eg acquisitions - by using
quoted shares as currency
 creating a market for the company's shares
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14. Disadvantages of Stock Exchange
 Market fluctuations - your business may become vulnerable to market
fluctuations beyond your control - including market sentiment, economic
conditions or developments in your sector.
 Cost - the costs of flotation can be substantial and there are also ongoing
costs of being a public company, such as higher professional fees.
 Responsibilities to shareholders - in return for their capital, you will have to
consider shareholders' interests when running the company - which may differ
from your own objectives.
 The need for transparancy - public companies must comply with a wide
range of additional regulatory requirements and meet accepted standards of
corporate governance including transparancy, and needing to make
announcements about new developments.
 Demands on the management team - managers could be distracted from
running the business during the flotation process and through needing to deal
with investors afterwards.
 Investor relations - to maximise the benefits of being a public company and
attract further investor interest in shares, you will need to keep investors
informed.
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15. Major Participants: Buyer and Seller
 Individual Retail Investors
 Institutional investors such as mutual funds, banks,
insurance companies and hedge funds, and also publicly
traded corporations trading in their own shares. &
 The Government
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Why stock price moves up or down
 Company doing good or bad business
 Financial results and bright or depressive expectations
 Players go for buying seeing rapid growth or selling anticipating
depressed earnings
 New innovative product launched / business explored
 Some incentives / taxation affecting stock

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 Growth in earnings and profitability
 Better management
 Cheaper inputs and raw material
 Demand going up for product or service
 News and rumours
Stocks mostly moves in speculation and attempt to discovers the
right price
How Stock Gains

18. The Trading Procedure on a Stock
Exchange
In order to purchase or sell securities on a stock exchange, the
following steps have to be taken;
1. Selection of a broker:
 The buying and selling of securities can only be done through SEBI
registered brokers who are members of the Stock Exchange. The broker
can be an individual, partnership firms or corporate bodies. So the first
step is to select a broker who will buy/sell securities on behalf of the
investor or speculator.
2. Opening Account with Depository: CDC – Central Depository Company
(for transfer of shares).
There are three types of accounts open in CDC company;
Investors Account – open by investors’ own name
Sub-Account – open through broker
Group Account – under the control of broker
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19. 3. Placing the Order:
 After opening the Account, the investor can place the order.
The order can be placed to the broker either personally or
through phone, email, etc.
Investor must place the order very clearly specifying the
range of price at which securities can be bought or sold. e.g.
“Buy 100 equity shares of Reliance for not more than Rs 500
per share.”
4. Executing the Order:
 As per the Instructions of the investor, the broker executes the
order i.e. he buys or sells the securities. Broker prepares a
contract note for the order executed. The contract note
contains the name and the price of securities, name of parties
and brokerage (commission) charged by him. Contract note is
signed by the broker.
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20. 5. Settlement:
 This means actual transfer of securities. This is the last stage
in the trading of securities done by the broker on behalf of
their clients. There can be two types of settlement.
(a) On the spot settlement:
 It means settlement is done immediately and on spot
settlement follows. T + 2 rolling settlement. This means any
trade taking place on Monday gets settled by Wednesday.
(b) Forward settlement:
 It means settlement will take place on some future date. It can
be T + 5 or T + 7, etc. All trading in stock exchanges takes
place between 9.55 am and 3.30 pm. Monday to Friday.
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21. Types of Order
 An order is placed by the investor to the broker to buy or sell
stocks
 There are different types of orders
 Each order has some purpose and has some distinct
advantages
 The orders are to be executed by the brokers
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22. Types of orders
 Day Order
 Order only valid for the day when it is given
 Week Order
 Order only valid for the week when it is given
 Month Order
 Order only valid for the month when it is given
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23. Types of orders
 Fill or Kill Order
 The order to be filled immediately or is considered cancel
 Good till Canceled Order
 The order that stands valid until it is cancelled
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24. LIMIT ORDER
 Default order type for all single stock orders.
 The limit price for buy orders is placed below the current
market price.
 The limit price for sell orders is placed above the current
market price.
 Limit orders will be filled at the limit price or better, but are not
guaranteed a fill.
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25. Types of Orders
 Limit
Limit-buy order Stop-buy order
Limit-sell orderStop-loss order
Sell
Buy
Price below the limit Price above the limit
Condition
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26. MARKET ORDER
 Also known as "not held” order used to guarantee an
execution, but not guarantee a price or time of execution.
 The risk of market orders is that you have no control over
what the execution price is.
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27. SPECULATION AND SPECULATOR
 SPECULATION : It is the transaction of members to buy or
sell securities on stock exchange with a view to make profits to
anticipated raise or fall in price of securities.
 SPECULATOR : The dealer in stock exchange who indulge in
speculation are called speculator . They do not take delivery of
securities purchased or sold by them , but only pay or rescue the
difference between the purchase price and sale price . The
different types of speculators are
 BULL
 BEAR
 STAG
 LAME DUCK
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28. BULL {TEJIWALA}
He is speculator who expects the future raise in price of securities he buys the securities to sell
them at future date at the higher price.
He is called as bull because his activities resembles as a bull , as the bull tends to throw its
victims up in the air through its horns. In simple the bull speculator tries to raise the price of
securities by placing a big purchase orders.
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29. BEAR {MANDIWALA}
He is speculator who expects future
fall in prices , he does an agreement
to sell securities at future date at the
present market rate .
He is called as bear because his
altitude resembles with bear , as the
bear tends to stamp its victims down
to earth through its paws . In simple
the bear speculator forces of prices of
securities to fall through his activities.
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30. STAG {DEER}
He operates in new issue of
market . He is just like a bull
speculator . He applies large
number of shares in the issue
market only by paying , application
money , allotment money. He is
not a genuine investor because ,
he sells the alloted securities at
the premium and makes profit. In
simple he is cautious in his
dealings . He creates an artificial
rise in prices of new shares and
makes profits.
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31. LAME DUCK
He is speculator when the bear operator finds it
difficult to deliver the securities to the consumer
on a particular day as agreed upon , he
struggles as a lame duck in fullfilling his
commitment . This happens when the prices do
not fall as expected by the bear and the other
party is not willing to postpone the settlement to
the next period.
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32. Pakistan’s Stock Exchanges
 The Karachi Stock Exchange (KSE) was established on 18th
September, 1947. It was later converted and registered as a
Company Limited by Guarantee on 10th March, 1949. the oldest
stock market of Pakistan.
 Lahore Stock Exchange (Guarantee) Limited came into existence in
October 1970, under the Securities and Exchange Ordinance,
1969, of the Government of Pakistan in response to the needs of
the Provincial metropolis of the Punjab.
 The Islamabad Stock Exchange (ISE) was incorporated as a
guarantee limited Company on 25th October, 1989 in Islamabad
Capital territory of Pakistan with the main object of setting up of a
trading and settlement infrastructure, information system, skilled
resources, accessibility and a fair and orderly market place that
ranks with the best in the world.
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33.  In January 11, 2016 the Karachi Stock Exchange, Lahore
Stock Exchange and Islamabad Stock Exchange were
integrated under the Stock Exchanges (Corporatisation,
Demutualization and Integration) Act, 2012 to form the
Pakistan Stock Exchange Limited as the only stock exchange
in Pakistan.
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34. Thank You!
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