Presentation on ISE

7/28/2019 Presentation on ISE

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WELCOME

to

Islamabad StockExchange

Prosperity Through Transparent Market


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Topics to be discussed

History of Stock Exchanges1

Functions of Stock Exchange2

Basic Concepts3

Regulatory Structure & Governing Laws4

Operational & Trading Activities5


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Stock Exchanges History

Unofficial share markets existed across

Europe where brokers would meet outsideor in coffee houses to make trades

11th Century

13th

Century

Till 1600

1602

In France, courtiers de change

(first Brokers) traded in debt

and government securities

In Bruges (Belgium) commodity traders

gathered in house of Van der Burse.

That meeting was called Bruges Bourse.

That idea spread in neighboring countries

and bourses were formed in various places

Amsterdam Stock Exchange (firstStock exchange) was created and

it began official trading shares of

Dutch East India Company


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Stock Exchanges History

Europe & OthersBy early 1700s there

were fully operational

stock exchanges in

France and England.

America followed in the

later part of the century

by signing Buttonwood

Agreement. Other parts

of the world followed later

in 19th century. There are

now a large number of

stock exchanges in the

world.

TitleAdd your text

Sub-continent ofIndiaBefore Independence

there were many stock

exchanges established

in sub-continent during

1800s. In 1934 Lahore

Stock Exchange was

formed but it was closed

after partition and later

on merged with Delhi

Stock Exchange.

Karachi Stock exchange

was founded in 1947.


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Functions of Stock Exchanges

RaisingCapital for

business

Redistribution

of wealth

Barometer of

the economy

Mobilizing

saving for

investment

Facilitating

company

growth

Creating

investment

opportunities

for small

investors

Corporate

governance

Bought&

sold

Efficiently&

fairly

vetting

companies


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Stock Exchange & Economy

Expansion /New Project

AttractsForeign

Investment

EmploymentGeneration

TaxContributions Money circulation


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Sensitivity of Stock Market

Emotions

News

Economy & Politics

Earnings of Companies

Rumors

Demand & Supply

Stock

Market


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Investor Vs. Speculators

Those who investors knows the company

or atleast the industry and were often involves the

growth.

Investors have reasonable ways to quantify risk.

There has been another type of investor.

The investor does not have a deep knowledge about

the company or industry he invests in.

He invests based on trends, or charts, or tips, or

generally guesses about the Market.


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Basic Concepts

Bull & Bear

Blue Chip

Carry-Over Trades

Dividends

Right IssueBook closure

Buy Stop Order

Inside trading

Portfolio

Public Limited CompanyShort selling

Ex-Dividend Dates: When a company

declares a dividend, it sets a recorddate when you must be on thecompany's books as a shareholder toreceive the dividend.

Earning per share (EPS): Aprofitability indicator calculated by

dividing the net after-tax earnings(earnings available to commonshareholders) during a period by theaverage number of shares outstandingat the end of that period.

Stop-Loss Order: An order placed

with a broker to sell a security when itreaches a certain price. It is designedto limit an investor's loss on a securityposition. Also known as a "stop order"or "stop-market order".


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Regulatory Structure

Parliament

Ministry of

Finance

Securities &Exchange

Commission

of Pakistan

State Bank of

PakistanFederal Board

of Revenue

ISE

CDC NCCPL


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Governing Laws

The Securities and Exchange Commission of Pakistan (SECP) isthe main regulator of the stock market. It regulates the stockmarket through following major statutory laws/rules:

Securities and Exchange Ordinance 1969

Securities and Exchange Rules 1971 Securities and Exchange Commission of Pakistan Act 1997 Specific Purpose Legislations for Conduct of Trade

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


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2009

2006 ~ 2007

2002 ~ 2003

1996 ~ 1997

ISE Towers were inaugurated in 2009

Logo of ISE was redesigned in 2009

UTS was established with LSE in 2007

T+2 cycle was introduced in 2007 UIN system was established in 2006

New RMS was introduced in 2006

Remote Trading was implemented in 2003 System Audit of Brokers was introduced in 2003

ULTRA TRADE trading system was adopted in 2002

ISE 10 Index was launched in 2002

Computerized Trading called ISE-CTS started in 1997

ISE Network Index was launched in 1996

Brief History of ISE


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Corporate Structure of the Stock Exchanges

The affairs of the Exchanges are run by the Board ofDirectors.

Composition of the Board:

Elected from Members of the Exchange 5

Nominated by SECP 4

The Managing Director 1

Total 10

Managing Director is a member of the Board byvirtue of his office. The Chairman of the Board iselected out of the non-member directors.


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Organizational Structure

GM (Operations)Company

Secretary

Managing Director

CEO

Departmentof

Companies

Affairs

Department

of

Internal

Control

Departmentof

Investors

Relations

Department of

General

Administration/

Finance

Departmentof

New

Building

IT Wing


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Customers

of ISE

Members

ISE has a very small

base of investors as

compare to other

Exchanges

Investors

261 Companies are

listed in ISE

Rs. 200 million

paid-up capital

public offer should

be Rs.100 million or20% of the capital

whichever is higher

500 applicants

Issuers

ISE has 119 Members/

Brokers

26 individual

93 corporate

Pakistani Citizen

Having certain

taxable income

GraduateNot defaulter of any

public institution

Not penalized for any

moral guilt

Membership Fee

Stakeholders of ISE


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Operations of ISE

Companies

Affairs

Provide listings to Companies Monitor listed companies

Provide quotations to media

Ensure listing requirements and code of

corporate governance by companies

Internal

Control

Grant membership to brokers Control members

Monitor computerized trading

Perform market surveillance

Manage Risk Management System

Investors

Relations

Provide Information to Investors Deal with Complaints of Investors

Educate Investors

Handle Default & Legal Cases

Keep Media Relations


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Trading Systems

The stock exchanges have fully computerized trading systems andout-cry systems no more exist.

Bids (buy orders) and offers (sale orders) are placed in the tradingsoftware and then executed accordingly.

Types of Trading:

Regular

Future

Trade Orders: Market Order

Limit Order


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Custodial Functions

Central Depository Company of Pakistan Limited (CDC) providescustodial services for shares.

It ensures efficient handling and transfer of shares.

Types of CDC Accounts:

Main Account for Brokers ( a gateway account)

House Account (a family account of the Broker)

Sub-Account (An investor account with CDC throughBroker)

Investor Account Services. (Facilitating the Investors to open their

independent CDC Accounts) Initial Account Opening Fee: Rs.500/-.

Annual renewal Fee Rs.500/-.


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Broker

Broker

Buying Investor

Shares

Selling Investor

Broker

Buying Investor

NCCPL

Broker

Selling Investor

Proceeds

AmountShares

Shares Proceeds

Activity Chart

SECP


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Trader at Member OfficePlacing buy/sell orders in TWS for its clie nts

Trading Server @ ISEOrder matching/execution

Trader at Member OfficePlacing buy/sell orders in TWS for its cli ents

Connected to Server through Network or Internet

InvestorTerminal provided by Member.

NCCPL CDC

InvestorTerminal provided by Member.

Placing orders directly.

SECP


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Step 1

Step 2

Step 3

Selecting Stock Broker

Opening Account with Stock-Broker

Placing Orders

Commission/Brokerage Fee

Delivery

Clearing & Settlement

Procedure for Trading in ISE


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Stock Market Index

KSE-100 INDEX

LSE-25 INDEX

ISE-10 INDEX

ISE-10 INDEX: Date of launching: Jan 1, 2004The main objective for the construction of an index is to track theperformance of the various listed stocks according to their marketcapitalization. A capital weighted index is composed of a basket ofsecurities, which captures the change in market capitalization due tothe variation in prices. Mathematically this can be represented by:

Index Value = Total market capitalization * 1000

Index divisor


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Trading Fees and Levies

% of TradedValue

Exchange Transaction Fee .00415

Appropriation:

SECP levy .00065

Investor Protection Fund .00100

Members Protection Fund .00100

ISE Income .00150


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Sources of Revenue of ISE

Listing Fees

Initial listing fee @.1% of total paid-up capital maximumupto Rs.1.00 million Annual Listing Fee

Paid-up Capital

Upto Rs. 50 mn Rs. 10,000/- P.A.Above Rs. 50 mn to Rs. 200 mn Rs. 15,000/- P.A.Above Rs. 200 mn Rs. 25,000/- P.A.

Additional Listing Fee @ 0.1% of the increased capital

Trading Fee @ 0.0015% - Rs.1.50 per Rs.100,000 value oftransaction Any Other Income Source


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Assessing Securities

Fundamental

Analysis

Technical

Analysis

Economic

Factors

Industrial

Sectors

Companies

AnalysisCharts

Graphs

Technical

Indicators


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Word of Advice

1. Understand the nature of Stock Investmentbefore making any investment decision.

2. Always Invest Through a Registered Broker ofthe exchange.

3. Diversify your investment to a possibleextent.

4. Keep Complete record of your Investments.

5. Maintain your own CDC account for the safecustody of your shares.

6. The key to making money in stocks is not toget scared out of them.


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Quotes by Market Gurus

Warren Buffett

Only buy something that you'd be perfectly happy tohold if the market shut down for 10 years

John Templeton

Diversify your investments.

Warren Buffett

Wide diversification is only required when investors donot understand what they are doing.


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Market Summary Report


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Presentation on ISE

Documents

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