Project Report On Islamabad Stock ExchangeIse - 2

A Project Report on Islamabad Stock Exchange
By
Muhammad Idrees (5027)
A project report submitted to the Department of Accounting & Finance, Faculty of

Management Sciences, International Islamic University Islamabad in partial fulfillment of
the requirements for the degree of
MASTER OF BUSINESS ADMINSTRATION

(FINANCE)
Department of Accounting & Finance

Faculty of Management Sciences
International Islamic University Islamabad
A project report on Islamabad stock exchange

1
By
Muhammad Idrees (5027)
MASTER OF BUSINESS ADMINISTRATION

(FINANCE)
Submitted To
Ch.Mazhar Hussain
Department of Accounting &Finance

June 2012
Copyright2012 by Mr. Manzoor Ahmad and Mr. Muhammad Idrees.

All rights are reserved. No part of this project report can be reproduced in any form or any
means such as photocopy or electronic media etc.with out prior approval of authors.
Supervisors Certificate
This is certified that Mr. Muhammad Idrees (5027) student of MBA (1.5) have completed
their project report entitled Project report on the Islamabad Stock exchange under my
supervision. I have checked this report and found it bonafide it works of authors.
Mr. Ch Mazhar Hussain

SUPERVISOR
Assistant Professor
Dr. Zaheer Abbass

Head, Department of Accounting & Finance
Dedication
We want to dedicate this project to our parents
Who pray for our success and to my teachers who guide us in
The whole of our education.
TABLE OF CONTENTS
5
CH#
PAGE
PARTICULARS
NOs
01
INTRODUCTION AND EVALUTION OF STOCK EXCHANGE
01
WHAT IS STOCK EXCHANGE
02
02
EVOLUTION OF STOCK EXCHANGE
02
03
HISTORY OF STOCK EXCHANGE IN PAKISTAN
THE STOCK EXCHNGES OF PAKISTAN
05
THE KARACHI STOCK EXCHANGE (KSE)
06
06
KSE 30 INDEX
07
08
KMI 30 INDEX
08
KSE 100 INDCES
08
THE LAHORE STOCK EXCHANGE (LSE)

HISTORY OF LAHOOR STOCK EXCHANGE
03
ISLAMABAD STOCK EXCHANGE

SHORT OVERVIEW OF ISE
09
10
11
INTRODUCTION
12
THE ISLAMABAD STOCK EXCHANGE MAIN OBJECTIVES
13
14
MISSION & VISION
17
18
ROLE OF STOCK EXCHANGE

HIERARCHRY OF ISE
04
DUTIES AND RESPONSIBILITIES
REGULARITRY STRUCTURE OF THE ISE

MINISTRY OF FINANCE
SECURITY EXCHANGE COOMISSION OF PAKISTAN
21
23
23
24
25
CENTRAL DEPOSITRY COMPANY
27
ELEMENTS OF CENTRAL DEPOSITRY COMPAY
HOW CDC WORK WITH STOCK EXCHANGE
SERVICES PROVIDED BY CDC
THE CENTRAL DEPOSITORU SYSTEM
OPERATIONS OF CDS
BENEFITS OF CDS
THE NCCPL
THE NCSS
THE SERVICES OF NCCPL
28
28
28
29
30
05
30
30
TRADING PROCEDURE AND INDEX CALCULATION
33
TRADING PROCEDURE OF ISE
34
ISLAMABAD STOCK EXCHANGE INDEX

RULES FOR THE SELECTION OF STOCK
06
36
36
37
METHODOLOGY FOR THE CALCULATION OF INDEX
THE FIVE YEARS PERFORMANCE HIGHLIGHTS OF ISE
45
FIVE YEARS FINANCIAL PERFORMANCE OF ISE
46
47
PIE CHART OF ISE
47
48
FUNDS CHART
48
TOTAL ASSETS CHART
49
49
TOTAL LIABILITIES CHART
50
FIVE YEARS MARKET PERFORMANCE OF ISE
50
51
TOTAL PAID UP CAPITAL
51
TOTAL NUBERS OF LISTED COMPANIES
52
52
TOTAL MARKRT CAPITALIZATION
THE ISE10 INDEX CHART

TOTAL ASSETS TURNOVER
NEW LISTED DURING THE YEARS
THE ISE 10 INDEX GHRAPH
GLOSSORY
SUGGESSTIONS AND RECOMMENDATIONS
53
61
CONCLUSION
REFERENCES
65
66
LIST OF TABLES
S/NO
PARTICULARS
PAGE NOs
KSE STATESTICS AND INDCES ON 24, APRIL 2012 TABLE
07
CDC STATESTICS TABLE
29
INDEX CALCULATION STAGE # 1 TABLE
37
STAGE # 2 TABLE
38
THE REPLACEMENT OF INDEX STEP # 1 TABLE
41
STEP # 2 TABLE FOR NEW DIVISOR
42
ADJUSTMENT OF DIVIDEND STEP # 2 TABLE FOR NEW DIVISOR
43
STEP # 3 TABLE
44
FIVE YEARS FINANCIAL HIGHLIGHTS OF ISE TABLE
46
10
FIVE YEARS MARKET PERFORMANCE OF ISE TABLE
49
ABBREVATION LIST
IPOs
INITIAL PUBLIC OFFERINGS
CFO
CHIEF FINANCIAL OFFICER
UTS
UNIFIED TRADING SYSTEM
KSE
KARACHI STOCK EXCHANGE
JSC
JOINT STOCK COMPANY
LSE
LAHORE STOCK EXCHANGE
ISE
ISLAMABAD STOCK EXCHANGE
KMI
KARACHI MEEZAN INDEX
MD
MANAGING DIRECTOR
CEO
CHIEF EXECTIVE OFFICER
TFC
TERM FINANCE CRTIFICATE
GM
GENERAL MANAGER
MV
MARKET VALUE
SECP
SECURITY EXCHANGE COMMISSION OF PAKISTAN
CDC
CENTRAL DEPOSITORY SYSTEM
A/C
ACCOUNT
DFIs
DEVELOPMENT FINANCIAL INSTITUTIONS
IAS
INVESTOER ACCOUNT SERVICES
CDS
CENTRAL DEPOSITORY SYSTEM
UIN
UNIQUE IDENTICATION NUMBER
NCCPL
NATIONAL CLEARING COMPANY OF PAKISTAN LIMITED
NCSS
NATIONAL CLEARING SETTLEMENT SYSTEM
IPF
INVESTOR PROTECTION FUND
LIST OF DIAGRAMS AND GHRAPHS

S/NO
PARTICULARS
PAGE NO
ROLES OF STOCK EXCHANGE
HIERARCHY OF ISLAMABAD STOCK EXCHANGE
REGULATORY AUTHOURITY OF ISE
ELEMENTS OF CDC
THE ACCOUNT HOLDERS OF CDC
HOW CDC WORKS WITH STOCK EXCHANGE
ACTIVITIES CHART
KSE 100 INDEX RECOMPOSITION DIAGRAM
PIE CHART OF ISE
10
FUNDS GRAPH
11
TOTAL ASSETS GRAPH
12
TOTAL LIABILITIES GRAPH
13
TOTAL LISTED PAID UP CAPITAL GRAPH
14
17
22
25
25
27
32
39
47
47
48
48
49
10
14
TOTAL NO OF LISTED SECURITIES
15
TOTAL MARKET CAPITALIZATION GRAPH
16
ISE 10 INDEX GRAPH
17
TOTAL TURN OVER OF SHARES
18
NEW SECURITIES LISTED DURING THE YEARS
19
ISE 10 INDEX GRAPH
50
50
51
51
52
52
ORGANIZATION OF CHAPTERS
The first chapter tell about the past background and history of stock exchanges. It also
describes the scope and significance of stock exchanges.
The 2nd chapter is all about the introduction and history of the major stock exchanges in
Pakistan. There are only three stock exchanges in Pakistan, Karachi Stock Exchange,
Lahore Stock Exchange, and Islamabad stock exchange. The roles of stock exchange have
been also discussed in the chapter.
The 3rd chapter gives the short overview of Islamabad Stock Exchange. Then after this it
describe an introduction and background of the Islamabad Stock Exchange. This chapter
is also gives the information about Vision, Mission and objectives and hierarchy structure
of Islamabad Stock Exchange.
The 4th chapter tells us that how the Islamabad Stock Exchange is operating by law. It
describes the Security Exchange Commission of Pakistan (SECP), Central Depository
11
Company (CDC), National Clearing Company of Pakistan Limited (NCCPL) and their
roles in ISE.
The 5th chapter is all about the trading procedure and to how the Index is calculate of
Islamabad Stock Exchange.
Previous five year performance of ISE such as, the total value, Total turnover of shares,
Index, New securities listed during the years, total assets, total Liabilities etc has been
diagrammatically as well graphically represented in the 6th chapter.
At the end of the project we have given some suggestions and recommendations for the
ISE to improve and enhancing the performance.
Acknowledgement
We are thankful to almighty Allah who gives us courage to complete our project report on
Islamabad Stock Exchange.
We are very thankful and appreciate our supervisor Mr. Ch. Mazhar Hussain, for giving
us the precious time and his proper guidance and transferring knowledge to us.
We are also thankful to Faisal Fateh Malik the owner of the FALKI Capital brokerage
House and Mr. Usman Rasheed the incharge of investors relations in Islamabad Stock
Exchange who give us his valuable time and informations and guide us in the whole
project.
12
EXECTIVE SUMMARY
This project will cover the complete knowledge about the main working of stock
exchange. The history of the stock exchange, the three major stock exchanges in Pakistan
has been also discussed in the project. In this project we have mainly focused on the
Islamabad Stock Exchange and also discuss the Current situations of ISE. The project will
also coverer that how the index is calculated in the stock exchange. What are the duties
and the responsibilities of the different position holders in the managements of the ISE?
How the trading take place in the stock exchange, complete procedure of that is also
covered in the project. What is CDC and how the CDC work in the stock exchange is
discussed in the project. NCCPL which done the clearing and settlement of the stock
13
exchange is also discussed in the project. We have also discussed the previous five year
financial and market performance of the Islamabad stock Exchange to know that how it
performs in past and now. We have graphically show the financial and market
performance of the ISE. At the end of the project we have given some suggestions and
recommendations for the ISE we hope that if it is implanted so the performance of the
ISE will improve further.
SCOPE AND OBJECTIVES:

Now a days stock market plays a very important and significant role in economic
development and prosperity of a country. For the smooth functioning of the economy of a
country the existence of stock market is very important. Stock markets mobilize the idle
money of the people and redirect them to productive investments and thereby promoting
the economic growth of the country. Stock markets satisfy the needs of the individual
investors as well as the firms. For example the individual who have idle money and want
to invest in something which generate income for the daily expenses so investing in the
stock market is a good idea rather than keep that money idle in lockers or consumed.
Stock markets satisfy the need of financing of the private investors as well as the public
sectors. The firms who need the financing or facing difficulties in the funds for the
expansion of their business he can easily get financing by issuing the bond or shares in
the stock exchange to the public. The efficient stock market mobilizing the savings of the
people for investments and channelizing these savings to the most productive activities of
14
different sectors such as the agriculture, commerce, and industries. Stock market
existence is also help in expanding the commercial and industrial base, it stimulate the
economic activities, create the employment opportunities and as a result increate the
national output and per capita income.
SIGNIFICANCE OF THE PROJECT:

Being the students of Finance we are very enthusiastic about the stocks investment and
the place where the trading of stocks take place which simply known as stock exchange.
We had read and studied a lot about both, the stocks and the stock exchange but it does
not help to understand these two practically. By the virtue of this project we get a lot of
some interesting information and enhance our knowledge and experience about the
investment opportunities in the stocks. We had learnt about the basic information of stock
exchange, its activities, and its role in the economy of a country through this project. The
project give helps us in the understanding of the trading mechanism of the stocks/shares.
For every business it required capital/financing to expand its business and to take new
development projects, and stock exchange is one of the cheapest and easiest means
through which firms can finance their business. This project helps us know how the
index is established in practical. We also knew through this project about the
interrelationship among the Islamabad stock exchange, the Central Depository company
(CDC) and National clearing company of Pakistan limited (NCCPL) and the relation of
these three with the Securities & exchange commission of Pakistan (SECP) and Ministry
of Finance. We come to conclusion after this project that there is a large region of
population of which had large amount of potential investors, the only need to attract them
to ISE for investment in shares is to educate them about the investment opportunities in
Islamabad stock exchange.
OUR CONTRIBUTION IN THE PROJECT:
The behind of this project report which we have written and completed have so many
efforts. For this we have visited to different places. We have visited to stock exchange
several times where we meet to our Ex-teacher Mr. Faisal Fateh Malik which is currently
the owner and CFO of the Falki Capital brokerage house in Islamabad stock exchange.
We are very thankful to him because he helps us and give a lot of information about the
stock exchange. Then he recommended us to the in-charge investors relations officer
15
Mr.Usman Rasheed. Who also help us in the understanding of the administrative structure
of the Islamabad stock exchange and told us about the other activities which are routinely
held by Islamabad stock exchange for the investor and other delegations. We have
personally visited to Islamabad stock exchange for the understanding of unified trading
system (UST). On this different securities are listed and the change in the price of the
security is shown by this with in second.
We have also attended a special seminar on Islamabad stock exchange which is held in
international Islamic University Islamabad and organized by the Finance society of the
international Islamic university Islamabad. For this project we have studied different
books and also study the KSE 100 index manual for the stock exchange index
calculations.
For the data collections we have studied the business recorder, magazines and others
news papers. We have also use internet for the understanding of our topic. We have also
visited so many times and discuss our project with our supervisor Sir, Ch.Mazhar Hussain
16
CHAPTER # 01
INTRODUCTION
AND
EVOLUTION OF
STOCK EXCHANGE
INTRODUCTION
WHAT IS STOCK EXCHANGE:A stock exchange is workplace where the stock brokers and traders are involved in
the sale and purchase of socks and other types of securities.
The issue and redemption facilities of the securities are also provided by the stock
exchange. Income and dividend payments are also done by the stock exchange.
In simple words we can say that a stock exchange is market place where the buying
and selling of all types of securities and financial instruments trading are performed.
Stock exchanges are very important for the investors and firms. For the companies it
is important because through the issue of shares the companies can raise the capital
for the new projects and opportunities and for the investor it is important because the
investor can invest their saving or idle money in the stock in stock exchange.
Stock exchange is considered as the highly organized market for the sale and purchase
of securities. The securities which are traded in the stock exchange are, the shares
issued by the company, unit trusts and the other pooled investment products and
bonds. To trade a security on a stock exchange first it should be listed on the stock
exchange.
The members of stock exchange are called stock brokers. The trade on the stock
exchange is done by member only. Trading of initial public offering (IPOs) are take
place in the primary market and the subsequent trading is done in the secondary
market or stock exchange.
EVLUTION OF STOCK EXCHANGE:In France in the period of 11th century, the courtiers de change was concerned with the
managing of the debt and agriculture communities on the behalf of the government.
So we can say that these men were the first broker of the world.
Some stories suggested that the origins of the term Brouse come from the Latin
bursa which meaning a bag. However it is more likely that in the period of 13 th
century commodity traders in Bruges gathered inside the house of a man called Van
der Burse, and conducted a meeting that meeting was called the Bruges Burse and
in 1309 they institutionalized this until now informal meetings are held in this. This
idea was quickly spread in the neighbor counties and they also started opening of
2
bourses. In the middle of the 13th century the Venetian bankers began to trade the
government securities. In the 14th century the joint stock company concept came
which let the investors to invest in the business ventures and get profit or loss on a
share. In 1602 the East India Company came. It is considered as the first joint stock
company (JSC). East India Company issued the 1st shares on the Amsterdam stock
exchange. The East India Company was also the first company who pay dividend.
This gives the right to the shareholders to demand more for their shares. In 1688, the
trading of stocks started on the stock exchange in London. On 17 th may, 1792 twenty
four supply brokers signed the Buttonwood agreement outside 68 Wall Street in New
York underneath a buttonwood tree. On 1817 properties got renamed to New York
stock exchange board in 19th century, exchange got substantiated to trader futures
contracts and then choices contracts. There are now a large numbers of stock
exchanges in the world. Such as the New York stock exchange, the London stock
exchange, The Tokyo stock exchange etc.
History of Stock Exchange in Pakistan:
In 1947 at the time of independence there were only few industries and other related
financial institutions in Pakistan the whole financial infrastructure of Pakistan was
very weak. There were very few insurance companies and financial institutions in
Pakistan who were engaged in the trade funds. In 1947 there were few commercial
banks in Pakistan and they were mostly involved in the in the financing commercial
operations. The state bank of Pakistan was established in 1948, which was the first
central bank of Pakistan which laid down the organized money market. When
Pakistan came into being in 1947 the need for the stock market was felt seriously. So
for this the government taken step and established the first stock exchange of Pakistan
in September 18, 1947 which called the Karachi stock exchange (KSE). The KSE was
converted into registered company limited by guarantee on March 10, 1949. At the
beginning the Karachi stock exchange had only 90 members and the total listed
companies were 13, the total paid up capital was Rs 108 millions.
With passage of time the number of companies and the trading activities across the
country were increased, so it was decided that other new stock exchange will be open
in the other region of the country. The government decided to open another stock
exchange in the city of Lahore. So in October 1970, the Lahore stock exchange (LSE)
was established. At the beginning Lahore stock exchange has just 83 members and
3
was housed in a rented building in the crowed area of the Lahore city. Later it was
shifted into other building. The Lahore stock exchange has two other branches in
Sialkot and Faisalabad also.
Later it was felt that there is also a stock market in the capital territory of Pakistan so
another stock exchange the Islamabad stock exchange (ISE) was established in 1992.
The Islamabad stock exchange incorporated as a guarantee limited company on
October 1989. Islamabad stock exchange was licensed as a stock exchange on
October 7, 1992. The first trading in the Islamabad stock exchange was started in July
1992. Currently there are three major stock exchanges in Pakistan: the Karachi stock
exchange, Lahore stock exchange and the Islamabad stock exchange. All the stock
exchanges play very important role in the development of economy of Pakistan. The
Karachi stock exchange is the largest stock exchange in Pakistan it is the second
oldest stock exchange in South Asia. The Karachi stock exchange in 2002 was
awarded as the best performance stock exchange. The Karachi stock exchange is the
main centre of the trading activities. About 80 percent trading activities of the country
are done in the Karachi stock exchange. Most of the Lahore and the Islamabad stock
exchanges companies are listed in Karachi stock exchange. Karachi stock exchange is
the main equity market of Pakistan and it has been in operation for almost 60 years.
The KSE observed so many and major fluctuations such as the may 28, 1998 when
Pakistan becomes the atomic power the stock index fall down from 789 and the
trading volume decreased from Rs 16,000,000 to Rs 9,000,000. The attack on the
world trade centre in September 2001, and the market crash of 2008 greatly affect the
stock market of the Pakistan. Now recently the stock market has recovered itself and
performing very well. The KSE100 index is round about 14132 which show a good
and positive sign for the investors and economy.
CH # 02
THE STOCK
EXCHANGES
OF PAKISTAN
STOCK EXCHANGES OF PAKISTAN:

There are three major stock exchanges in Pakistan. Which are Located in different cities
of Pakistan.
The Karachi Stock Exchange (KSE)
The Lahore Stock Exchange (LSE)
The Islamabad Stock Exchange (ISE)
The Karachi stock exchange:The Karachi stock exchange (KSE) is the first stock exchange of Pakistan. It was founded
in 1947. It is currently located on the stock exchange road in the heart road of Karachis
Business District. Karachi stock exchange is considers as the largest and oldest stock
exchange of Pakistan. KSE is also considered the second oldest stock exchange in south
Asia. At the time of its establishment the KSE have only 83 members and the total
numbers of listed companies in Karachi stock exchange were 13. The total paid up capital
of the Karachi stock exchange at the time of establishment is Rs 108 millions.
The Karachi stock exchange is considered as the most liquid exchange in Pakistan. In
2002 Karachi stock exchange was declared the best performance stock exchange of the
world (Business week). On November 1st, 1991 the Karachi stock exchange 100 index
was introduced and remain to this day the most generally accepted measure of the
exchange. The KSE 100 index is a benchmark used to compare prices over time, the
companies with the highest market capitalization are selected the for KSE100 index. To
ensure the full market representation the company with the highest market capitalization
from each sector is also included in the KSE 100 index. The Karachi stock exchange have
pre-market session from 9:15am to 9:30 am and the normal trading session of the KSE is
9:30am to 3:30 pm.
THE KSE INDICES:
Karachi stock exchange has the following indices:
The KSE 30 index:
This included the top 30 companies have the highest market capitalization. This was
introduced in 2006. The KSE 30 index is different from other indices because the KSE30
index is based only on the free float of shares rather on the basis of paid up capital. The
other KSE indices represented the total returns of the market. While the KSE 30 index is
adjusted for the dividend and rights shares.
6
The Karachi Meezan Index (KMI 30 index):

This included the top 30 most liquid shariah compliant companies listed on KSE. This
was introduced in September 2008. In this only those companies are listed who do their
business according to the rules of shariah.
The KSE 100 index:
The KSE 100 index includes the top 100 companies from the all sectors having the
highest market capitalization. The KSE 100 index is the representation of the all sectors.
The KSE 100 index is the most recognized index of the Karachi stock exchange. It
represents about 80 percent of the market capitalization of the exchange. The other 20
percent is represented by the KMI30 index and the KSE 30 index.
KSE STATESRICS AND INDCES ON APRIL 24, 2012
Exchange statistics
Date
24/4/12
Time
16:28
Total
Advanc
Trade
118859
171
Decline
Unchange
Total Exchange Exchange
d
146
56
373
volume
value
322048562
10339303898
Indices
Index
Current index
High
Low
Changes
Volume
Value
KSE-30
12382.88
12508.35
12365.05
16.45
130930843
6891819333
KMI-30
24406.68
24691.46
24375.39
24.45
83297680
4578681832
KSE-100
14132.58
14231.47
14083.45
49.14
212847965
8211016116
ALL SHARES
9931.68
10002.74
9899.14
32.53
297163564
8864514113
LAHORE STOCK EXCHANGE (LSE):

Lahore stock exchange is the second largest stock exchange of Pakistan. It is situated in
Lahore, Pakistan. Lahore stock exchange (LSE) is the only stock exchange in Pakistan
which is fully electronic and completely automated.
History of Lahore Stock Exchange:
Lahore stock exchange was established in the year 1970 and is become the second largest
stock exchange of Pakistan which has a market share of around 12-16% in terms of daily
traded volume. The number of listed companies on LSE is 519 which represent different
sectors of economy, which have listed capital of 555.67 billion having market
capitalization of around Rs. 3.64 trillion. The members of LSE are 152 in which 81 are
corporate and 54 are individual members.
Over the years, LSE has successfully confronted with various challenges and has now
emerged fully geared and position to aggressively compete with the fellow Exchanges,
playing its role in the growth of capital market in Pakistan.
The credit goes to LSE because it was the first stock exchange in Pakistan which use
internet and now about half (50%) daily transaction are via internet in LSE. The two other
branches of LSE are in the city of Faisalabad and Sialkot for trading. The branch located
in Sialkot as known as Sialkot trading floor.
CH # 03
THE ISLAMABAD
STOCK EXCHANGE
SHORT OVERVIEW OF ISLAMABAD STOCK EXCHANGE:
Location of ISE
The ISE is located in the blue area of Islamabad at Jinnah Avenue which is the hub of
all business and commercial activities in Islamabad.
Index of ISE
The index used by Islamabad stock exchange is ISE 10 index
Currency of ISE
The ISE used Pakistani rupees as currency
Culture of ISE:
Employees work in Islamabad stock exchange belongs to different areas of country
thats why it is a multicultural organization.
Language of ISE:
English is the official language of the ISE but most of the communication in the ISE
is done in national language Urdu.
Dress of ISE:
Top management are bound to wear paint and shirt with tie and the lower staff
members are not bound they have the option to dress paint and shirt with tie or not.
Numbers of listed companies in ISE:

The total number of listed companies in Islamabad stock exchange is 261 currently
but the this figure can change from time to time due to listing and delisting of
companies.
Number of total members in ISE:

The total number of members in ISE is 121 of which only 49 are active the others are
inactive.
Chairman of the ISE:

Mr. Muhammad Rashid Zahir is the current chairman of the ISE.
Managing Director of ISE:

Main Ayyaz Afzal is the current MD/CEO of ISE.
Website of ISE:
www.ise.com.pk
10
INTRODUCTION:
The Islamabad Stock Exchange is the youngest stock exchange in Pakistan. Islamabad
Stock Exchange (ISE) was incorporated as a guarantee limited company on October
25th 1989 and was fully operational on 10 th august 1992 in the capital territory of
Pakistan with their main aim of setting up a trading settlement infrastructure,
information system, skilled resources, accessibility and a fair and orderly market
place that can ranks with the best in the world. The main aim of establishing the
Islamabad Stock Exchange was to cater the needs of less developed areas of the
northern part of the country.
The Islamabad Stock Exchange provides easy access to both the domestic as well as
to the foreign investors. Islamabad Stock Exchange actively encourage the listing of
the profitable and eligible companies, either it is small company or large company it
encourage its listing and this make the Islamabad stock exchange as an exciting and
diverse exchange. The Islamabad stock exchange play very important role in the
economic prosperity, welfare, development and growth of the country.
At present there are 261 companies are listed in Islamabad stock exchange. However
this numbers of listed companies may be increased or decreased due to the listing or
delisting from time to time. Currently the Islamabad Stock Exchange has 120
members out of which, 26 are individual, and 94 are corporate members. On January
2004 the Islamabad stock exchange has launch its own capital weighted index which
called the ISE 10 index. December 31, 2002 was taken as the base date and the base
value is taken as the 1000. Before launching the ISE 10 index it was using the KSE
100 index. The ISE used the T+7 settlements in the begging; In 2001 it was change to
T+3 settlements. And then in 2007 the T+2 settlements were introduced to minimize
the overall settlement risk of market. In the year of 2002 the computerized trading
system was introduce which brought much transparency in the security trading. It has
been designed in such a way to provide automatic matching of bids and offers for
execution purpose. No human interference is involved in this system of trading; the
best trades are executed and pass on to the participants. Confirmation is printed and
sent statues messages immediately to the member for the each of his order. The
Islamabad stock exchange in June 2003 introduced a new system for trading which is
called the remote trading system. This system is also called the internet trading
11
system. This system have so many advantages which as the system have their own
software and enable the broker to trade from everywhere of the world by using the
ISE software.
THE ISLAMABAD STOCK EXCHANGE MAIN OBJECTIVES:
FOLLOWING ARE THE MAIN OBJECTIVES OF ISE:
TO INCREASE THE INVESTMENT OPPORTUNITES FOR THE LCOAL AND FOREIGN

INVESTORS IS THE MAIN OBJECTIVE OF ISLAMABAD STOCK EXCHANGE.
ANOTHER OBJECTIVE OF THE ISLAMABAD STOCK EXCHANGE IS TO ENSUR THE CAPITAL

MOVMENT ACROSS THE REGION.
TO INCREASE THE INTEREST AND ATTRACTIVENES OF THE LOCAL AND FOREIGN

INVESTORS BY MAKING IT THE BEST INVESTMENT AREA.
TO PROVIDE THE OPTIMUM FINANCING OPPORTUNIES TO THE INDIVIDUAL AS

WELL AS TO FIRMS.
12
MISSION AND VISION STATEMENT OF ISLAMABAD STOCK EXCHANG
13
ROLE OF STOCK EXCHANGE
14
SOURTCKAFINGXHPVMB.DZYJEL
Stock exchange plays a very important role in the economy. It has multiple roles in
economy. Some of them are the following.
i.
Stock Exchange mobilizing saving for investment:

15
The first role of stock exchange in economy is that it mobilizes the savings for
investment. It is best decision for public to draw their savings and invest it in stocks.
Because investing in stocks that money which is keep idle in bank accounts or which
could have been consume are mobilized or redirected to the productive areas and thus
it will promote business activities and benefit different economic sector such as
commerce, agriculture, and other industries.
ii.
A source of raising capital for business:

Most of the business required capital for his expansion of business activities. Stock
exchange provides the facility to raise capital through selling of shares to the public.
People draw savings from banks and invest it in shares. People know that when they
need money, they can easily sell the shares in stock exchange. Thus we can say that
stock exchange one role is that it serves as a source of capital raising.
iii.
Stock Exchange create investment opportunities for small investors:

Some businesses required a huge amount of initial cash outlay, but opposite to that
other business stock exchange provide investment opportunity to both small investor
as well as large investor. Investment in shares open for both for small and large
investor in a stock exchange can buy shares according to his financial position. If he
has more money he can buy more shares, but if he have less money he can buy less
shares.
iv.
Stock Exchange provide employment opportunities:
Stock exchange also provides job opportunities for the public. It provides job
opportunities not only to jobber but also to the other members who perform activities
in the stock exchange. So we can say that stock exchange is a good source of
employment for the investors and also for members as well as for employees.
v.
Stock Exchange as a Barometer of economy:
The share price of the stocks exchange arise and fall, this increase and decrease in
price of share is depend on the demand and supply of share. The price of the share
16
remains stable or increases when the economy and company show the sign of stability
and growth. But the decrease in price of shares occurs when the economy or company
show negative sign such as depression, economic recession and financial crisis. So we
can say that stock exchange is good barometer of economy. On the basis of this we
can say that the economy of this country is good or bad.
vi. A source of raising capital for Govt. development projects:
Some time the government also have lake of funds, they need funds to finance their
infrastructure projects such maintenance of roads, sewage system, water and
sanitation system etc, for raising funds they issue a security which is known as the
Bonds. These bond are brings in the stock market for trading, where the member of
public buy them, thus loaning the money to the government.
HIERARCHERY OF ISLAMABAD STOCK EXCHANGE
17
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DUTIES AND RESPONSIBILITIES:

Duties and responsibilities of different positions holder of ISE
18
CHAIRMAN:
The duration for the post of chairman is only one year. The chairman is elected by the
voting of the board of directors. They elect the chairman in the meeting of the board
of directors. In case, if no other person is elected for the post of chairman then the old
one will be eligible for that post, and only for three year he can held the position of
chairman on the behalf of board of directors. Main duties of chairman are the
following.
Observing the overall functions including policies of management is the main
duty of the chairman of the stock exchange.
The approval of the managing director documents is the second main function
of chairman.
All of the meeting is chair by the chairman of the stock exchange.
Chairman is responsible to call meeting upon any complex issue arise
regarding stock exchange.

MANAGING DIRECTOR:
Managing Director is a key post in the stock exchange. His main responsibility is to
watch the activities of staff to chairman of the stock exchange. Managing director is
appointed by the board of directors for three year. Managing director is full time
employee of the stock exchange. He is an impartial and independent person.
Managing director is bound that he should not be involve in any trading activates
regarding of stock exchange.
The main function and responsibilities of managing director are the following.
The betterment of the management of the stock exchange is the main duty of
the managing director.
He tries to sustain daily routine matters of stock exchange.
All the training required for the staff is arranged by the managing director.
He provides all the information required by the directors.
Keeping up to date data is the duty of the MD.
19
DIRECTORS:
Through election process directors of the stock exchange are elected. They have the
power to check the accounts of stock exchange any time and have the authority to give
order for the betterment of the stock exchange.
Following are the main duties and responsibilities of directors.
In the meeting of the board of directors they have the right and it is the duty of
the
director of the stock exchange to give their opinions for the betterment of the stock
exchange.
Inspection of the stock exchange accounts is the responsibility of the director.
This is the duty of the director give approval of the future investment of the stock
exchange.
In the meeting for the board of directors, this is the duty of the directors to decide
about loan in which form (bonds or TFCs).
SECRETARY:
Secretary is responsible for the general management of stock exchange. He is the head
of secretariat and is considered as the senior officer of stock exchange. Secretary is
responsible for the work which is give by the chairman and managing director to him.
The duties and responsibilities of secretary are the following.
He is responsible to inform all the members about the meeting called by the chairman
or director.
He is responsible to issue the notice to members for the annual general meeting.
The stock exchange common seal responsibility is given to secretary.
When the sectary issue the minute- sheet to the managing director of the stock
exchange, the sectary is liable to check the total expenses of the meeting.
All the meetings of board of directors must be attend by the sectary of the stock
exchange.
GENERAL MANAGER:
20
All the matters of different departments which come under his supervision are deal by
general manager.
Following are the duties and responsibilities of general manager.
General Manager works as consultant for the other departments of the stock
exchange.
To collect the informations the General Manager keeps himself in touch with
the other stock exchanges and also with regularity bodies of the stock exchange such
as the SECP and ministry of Finance.
The GM has the authority of delisting of company.
All the general management activities of the stock exchange are done by GM.
SENIOR EXECTIVE SECRETARY:

Senior executive secretary performs the following duties and responsibilities.
Senior exective secretary checking the emails of chairman and managing
director of stock exchange is the duty of the senior executive sectary
He is responsible to arrange and manage the hotel booking top management.
All the appointment of chairman and managing director is arranged by this
person.
He receives all the messages of the chairman and MD, and works just like
telephone operator.
Arrangement of the all official document of the chairman and MD is the duty
of the senior exective officer.
All the incoming and outgoing Fax is handled by this person.
ASSOCIATE MANAGER:
This person is called the head of department. He is responsible for all the function of
his department. His main work is to prepare summary of his departments all matters
and sent to the higher authorities such as Chairman, Managing director, secretary etc.
Duties and responsibilities of Associate manager are given below.
Sent summarize report to MD and General Manager regarding his department.
21
Associate manager is responsible for his own department.

He is responsible for all the dues and rules and regulations regarding law related to his
department.
STAFF:
Staff is the lower level employees of stock exchange. They are not directly
responsible to higher authorities regarding the jobs assigned to them. They are
directly responsible to their head of department such as the associate manager. Staff
members perform different jobs at stock exchanges and the job is assign to them by
associate manager.
CH # 04
THE REGULARITY
STUCTURE OF
22
ISLAMABAD STOCK
EXCHANE
THE REGULARTRY AUTHOURITY OF ISE

The Islamabad stock exchange has the following regularity bodies:
MINISTTRY OF FINANCE
SECURITY EXCHANGE COMMISSION OF PAKISTAN (SECP)
23
The Ministry of Finance:

The first regularity body of Islamabad Stock Exchange is the Finance Ministry. This
regularity body is the most powerful regularity body of stock exchange. This
regularity body only gives and sends information and instructions to Security
Exchange Commission of Pakistan.
The Security Exchange Commission of Pakistan (SECP):
24
The Security Exchange Commission of Pakistan (SECP) is a financial regularity body

in Pakistan. The Security Exchange Commission of Pakistan (SECP) was established
through passing act from parliament in December 1997. The SECP started his
operation in January 1999. The main purpose of establishing the Security Exchange
Commission of Pakistan (SECP) is to maintain the rules and regulations of securities
and all other matter related to the companies.
The Security Exchange Commission of Pakistan provide their services to wide range
of area which include investment financial services, insurance sector, non banking
financial companies, leasing companies, housing finance services, investment
advisory, real estate investment trust, and asset management services. Some external
service providers which are connected with the corporate sector of Pakistan such as
the chartered accountants, rating agencies, and the corporate secretaries have been
regulated by the Security Exchange Commission of Pakistan.
For the effective administration the work of the SECP has been divided into the
following six divisions which are:
The securities market division

Companies Law administration division
Insurance division
Enforcement division
Specialized companies division (Non banking finance companies)
And the support services division.
CENTRAL DEPOSITRY COMPANY (CDC):

During the last decade there was a huge increase and growth in the trading volume of
the capital market of Pakistan, due to this growth and increase in trading volume it
was very difficult to physically handle all the paper base work, not only difficult but
also time consuming. To make easy the work of stock exchange, stock broker and
banks the central depository company was introduced which has eliminated the paper
base work and introduce the CDS which handle all the transfer and records of the
stock exchange electronically.
25
The central depository company was established in 1993, as a public limited company
in Pakistan. In 1997 the CDC started his activities in Pakistan. The CDC is the only
one company in Pakistan which is involved in the paperless work. The main function
of CD is to handle the transaction settlement electronically. Currently the CDC
performs his operations in all of the three stock exchanges of Pakistan. The central
depository company (CDC) provides their services to stock exchanges, brokerage
houses, banks, etc.
The main objective of establishing the central depository company is to operate the
CDS in the capital market of Pakistan. This system has eliminated the physical
transferring of securities ownership. This system has improved the effectiveness of
the capital market of Pakistan which now attract so many local and foreigner
investors. The central depository company is regulated under the security exchange
commission of Pakistan (SECP).
ELEMENTS OF CDC:
The central depository system has three main elements which are the following
The account holder
The issuers/Registrars
Eligible pledges
The above mention elements of CDC have their own define role in the central
depository system
26
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1) THE ACCOUNT HOLDER:

The account holders can be divided into two categories
A.
B.
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Investor Account Holders

i.
Main A/c
The Participant/Broker
i.
Main A/C
ii.
House A/C
iii.
Sub-A/C
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27
Both the investor account holders and the participants have the direct access to central
depository system.
All the members of the stock exchange such as the commercial and non commercial
banks, Modarabas and Development Financial Institutions (DFIs) are allowed to open
their account as participants while the corporate bodies such as the leasing companies,
qualified private investor and insurance companies can open their account as account
Holder.
A. INVESTOR ACCOUNT HOLDERS:
The investor account holders are allowed to keep their beneficially owned securities
in central depository system. The investors have direct access to their account. These
people have just main account with CDC.
B. PARTICIPANTS / BROKER ACCOUNT:
The participants or Brokers are allowed to keep their beneficially owned securities
and also provide the custody services to their client. The Brokers maintain the other
three more accounts with CDC, Which are
HOUSE ACCOUNT:
The account which is maintained by the brokers with CDC for their brokerage house.
MAIN ACCOUNT:
The main account is that one account through which the brokers keep their own
beneficiary securities.
SUB AACOUNT:
This is the account which is maintained by the participants or brokers for their
individual investor.
2) THE ISSURE/REGISTRAR:
All those companies whose securities are posted on the central deposit system are
called the issuers. The issuer can appoint Registrar/Transfer Agent (R/TA) for the
purpose to perform its obligations. The issuers also have direct access to CDS.
3) THE ELIGIBLE PLEDGEE:
All those companies and financial institutions like banks, DFI, which have the
authority to provide the financing against securities, are allowed to join the central
depository system in the capacity of eligible pledgee. The stock exchanges and
28
clearing companies can also join the central depository system in the capacity of
pledges for the purpose of risk management.
HOW CDC WORKS WITH STOCK EXCHANGE?
DETAILED PROCEDURE:
There are two parties: say party A and party B, Both the parties have their accounts in
central depository company.
A transaction takes place between party A and party B at stock Exchange. Party
A sells his securities to party B. The Party A sent request to his participant to
transfer his shares to party B account. Participant enters transfer request and data of
into system. In CDS, Shares are transferred electronically from party A account to
party B account. Intimation about transfer of securities are sent to both parties.
29
THE SERVICES PROVIDED BY CDC:
It started investor account services (IAS) in 1999, through this service the retail
investors can also directly open account with CDC.
In 2002 the central depository company started Trustee and Custodial Services (T&C)
service by listing the mutual funds (open & close ended) and voluntary pension
scheme
In 2008 the Share Registrar Services (SRS) has been introduce by the CDC. through
this service the facilities of transfer, registration & verification of shares and the
records of the securities is provide on the behalf of the issuer company.
THE CENTRAL DEPOSITORY SYSTEM (CDS):
A central depository system is computerized book entry systems that facilitates the
transferring of securities and maintain the records of securities. This system is
generally used by stock exchanges and the brokerage houses. The system was
installed by IBM-led consortium.
The central depository system facilitates various financial instruments such as debt,
equity and the other financial instruments of the capital market in Pakistan. The TFCs,
preference and the common shares, the WAPDA bonds, open and close ended funds
and Modaraba certificates is deal and manage by the central depository system.
OPERATIONS OF CDS:
The central depository system perform the following operation
The first operation perform by central depository system is to deposit all the new and
existing securities into depository.

The second operation perform by central depository system is to withdrawal securities
in the form of certificates from depository.

The free transfer of securities.
The borrowing and lending of stocks through the mechanism of transfer is perform
by CDS
The corporate actions such as the right issue, bonus issues, sub division, consolidation
and any other action which bring changes in the numbers of securities held in the
participants account is performed by central depository system.
30
The movement of cash is also performed by central depository system. The transfer of
cash from one account to another account with or without security movement is
performed by CDS.
The pledge call and release of security is performed by CDC.
For the settlement of transaction the delivery versus payment of securities is
performed by central depository system.
What are the benefits of central depository system (CDS):
This system gives a lot of benefits some of them are the followings
The CDS have reduced the risk of lost and damaging of certificates.
There was a lot of paper work at the stock exchange; due to the CDS this paper work
has been eliminated. Now the transfer of securities is done electronically.
On the transfer in CDS there is no stamp duty.
A lot of time was required in transfer of ownership but now through CDS it transfers
in few minutes.
Save a lot of time of the employees
Give quick response to owner
It ensures the safe custody of securities.
There is no risk of duplicate or forged.
CDC STATESTICS
Performance
No of shares in CDS (in Bn)
June 30, 2010
June 30, 2011
March 31, 2012
78.15
83.82
95.67
1.403
1.658
1.861
84.08%
83.58%
84.84%
52,713
52,986
51,129
24.488
34.332
36.498
Market Capitalization of
shares in CDS (in Trillion)
% of shares in CDS w.r.t. total
share capital (Exl.GOP)
Total number of Investor
Accounts
Number of Securities in
31
Investor Accounts (in Bn)
NATIONAL CLEARING COMPANY OF PAKISTAN LIMITED (NCCPL):

The NCCPL stand for National Clearing Company of Pakistan Limited. National
Clearing Company of Pakistan Limited provides the clearing and settlement services
to all three stock exchanges in Pakistan. Before the incorporation of National Clearing
Company of Pakistan limited the clearing and settlement was done by each stock
exchange separately. The National Clearing Company of Pakistan provides its
services to all the three stock exchange, Karachi stock exchange KSE, Lahore stock
exchange LSE, and the Islamabad stock exchange ISE. The National clearing
company of Pakistan was established on third July 2001 in order to manage and
operate National clearing and settlement system (NCSS). The company was fully
operational in the year of 2003-04 by handling the settlement and clearing of all the
book entry securities through NCSS.
The national clearing company of Pakistan play very important role in the capital
market of Pakistan by providing their services. All those who are involve in the
trading of shares in any one stock exchange of Pakistan, the asset manage companies,
financial institutions and mutual funds, are the clients of the National Clearing
Company of Pakistan limited.
The NCCPL operations are governed through the following
The 2003 regulations of NCCPL
The 2003 procedures of NCCPL
The 2005 Clearing house rules
And the companies ordinance 1984

The NCSS:
The NCSS stand for National Clearing and Settlement System. The NCSS provide the
clearing and settlement services to the all three stock exchanges of Pakistan. The
NCSS is fully electronic settlement system. The NCSS started its live operations from
December 24, 2004. The main purpose of National Clearing and settlement system is
to replace the individual clearing of all the three stock exchanges of Pakistan.
32
THE SERVICES OF NCCPL:

The NCSS help and provide their services to all the three stock exchanges and
clearing members for the clearing and settlements of transactions. The services
provided by NCCPL through NCSS are the following:
Broker to broker (BTB) delivery system.
Institutional delivery system
Cross exchange netting
Margin Financing module
Fully automatic pay and collect system
Tariff collection through pay and collect
Netting of future market transactions with regular market trades
Registration of unique identification number (UIN)
Automatic handling of corporate actions of securities held in CDS blocked account
Clearing and settlement facilities through the NCSS for the trades and transactions
carried on unified trading system (UTS) platform of Lahore and Islamabad stock
exchanges.
Risk management of trades and transactions.
33
ACTIVITIES CHART
34
35
CH # 05
THE TRADING
PROCEDURE AND
INDEX
CALCULATION
THE TRADING PROCEDURE OF ISE:

The trading in a stock exchange means the buying and selling of securities. The
buying and selling of securities on a stock exchange involved the following steps
which are the
36
Step 1
Selection of Broker:
For the investor to trade a security in stock exchange he should first select the broker
for the trading of security. Because the broker is the authorized member of stock
exchange. For the investor only the broker is the legitimate person who can trade on
the behalf of investor a security. Orders are given by the investor to buy or sell the
specific security for him through call or visiting physically to the brokerage house.
Step 2
Placing of Order:
Placing of order in the stock exchange for the trading of security is the second step
then. The following three parties taking part in dealing of shares:
The stock Broker
The client (investor)
The jobber
Trading procedure is facilitate by the broker and who then contact to the specific
jobber on the behalf of his client in stock exchange. He does not told anything about
himself to the jobber weather he is a buyer or seller of the shares. For this reason the
broker asks the jobber to quote two prices:
I)
The higher price at which he will be ready to sell the shares
II)
The lower price at which he will be ready to buy the shares
For instance, Mr. Ali wants to sell one hundred shares of Engro Company. He informs
the broker dealing on the stock exchange. The broker asks the jobber to give his
quotations for the Engro company limited shares. The broker does not leak out his
position to the jobber whether he wants buy or sell the shares of the company. The
jobber gives the two prices, one at which he wants to buy and the other at which he is
ready to sell. For example, the quotations given by the jobber are Rs. 21.90 and Rs. 22
in hundred. So Rs. 21.90 is the price at which the broker wants to buy the share and
sell it at a price of Rs. 22per share. If the broker is not satisfied with this quotations he
can contact to another jobber or contact with the first one to reduce the margin
37
between selling and buying price. On the other hand if the broker is satisfied with this
new quotation then he informs his client about this bid price of the share. Now if the
client agrees with this new quotation price the bargain is take place.
Step 3
Preparation of Contract Note:
Preparation of contract note is the third step of trading procedure. The contract note is
prepared by the stock broker. The contract note have three copies, one copy of contact
note is send to the client, the second is given to the jobber and the third one keep with
himself.
The informations mentioned in the contract note are as follow
The name the address of the broker
The name and the address of the jobber
The commission of the broker charged
The bid price and the type of the share
And the date of transaction
Step 4
The Settlement
The settlement of the transaction is the final step of the trading procedure. The
transaction is settled according to the following conditions,
In case of ready delivery contract the transaction is settled on the current day, the
buyer pay the money and the seller deliver the securities.
In case of forward delivery contract the transaction settlement is done once in week or
in a month.
On the date of settlement the sale and purchase price differences will be paid without
any delivery of securities. If the both parties agree to postponed the deal to the next
settlement date they can do it.
38
ISLAMABAD STOCK EXCHANGE INDEX:

The Islamabad stock exchange used totally different index from the rest of the two
stock exchanges of Pakistan. The Karachi stock exchange used the KSE100 index and
the Lahore stock exchange used LSE101 index. And the index used by Islamabad
stock exchange is ISE 10 index. The index used by Islamabad stock exchange is
composite index. This was developed by a company which name is vital information
(pvt) Limited company. This company is a financial and data base company.
KSE-100 Index
KSE-100 index is a benchmark by the help of which the performance of the stock
price can be compared to over a period of time. This show and teach the investors a
sense of how Pakistan stock market is performing.
KSE-100 index was developed with the base value of 1000 points in the November
1991. KSE-100 index is consisting of 100 companies. These 100 companies are
selected on the basis of sector representation and highest market capitalization which
cover the 80% of the total market capitalization of the rest of the companies which are
listed on the stock exchange. In the total 35 sector, 34 companies are selected on the
basis of highest market capitalization in which a company represents only one sector,
and in it Open-End mutual fund sector are not included and the remaining 66
companies are selected on the basis of largest market capitalization but in descending
order.
RULES FOR THE SELECTION OF STOCKS:
The criteria for the selection of stock inclusion in the re-composition of KSE-100
index are as given below.
Rule # 01:
Those stocks will be selected which shows the largest market capitalization in each of
the 34 sectors of Karachi stock exchange excluding open-end mutual funds sector.
Rule # 02:
The remaining index places (in this case of 66) are chosen up by the largest market
capitalization companies in the descending order.
Rule # 03:
The company will not be considered for the re-composition of KSE-100 index which
has been banned for trading or declared Non tradable and on defaulter counter in the
preceding 6 months from the date of re-composition.
39
A number of 34 top sector companies on the basis of market capitalization may also
qualify for inclusion.
METHODOLOGY FOR THE CALCULATION OF INDEX:
The KSE 100 index represents a basket of the number of shares outstanding and its
prices. The value and worth of the basket are compared continuously to some starting
point or base period. For the KSE-100 index November 1991 is the base period. For
the simplicity total market value of the base period has been adjusted to 1000 points.
So 1000 points is the value which has been assigned for the total market value of the
base period (1991). To know about how the KSE-100 index calculation, lets take an
example of three stocks for the base period of 1991.
Let suppose a share X which has a price of Rs 10 and the total number of share
outstanding is 50000, so multiply the price of share with the number of share
outstanding it will give a market value of stock X Rs 0.5 million for the base period.
The same process is repeated for stock Y and Z whose prices are Rs.15 and
RS.30 and the number of share outstanding are 100000 a 150000 respectively. So the
stock Y give 1.5 million and stock Z provided 4.5 million of market value for the
base period respectively. These three market values are added up and set equal to
1000 to form base period value. All the future market will be compared to this base
period market value and indexed form.
INDEX CALCULATION STAGE # 1
Stocks
Shares price
Number of share
outstanding
Market Value
(Pak Rupees)
(Pak Rupees)
(Ba
e
X
10
50,000
500,000
15
100,000
1,500,000
150,000
=
45,000,00
6,500,000
Z
30
Total Market Capitalization
period value/Base Divisor)*1000 = (6,500,000/6,500,000)*1000 =1000

STAGE # 2
Index value as on Day 2
40
Stocks
Share prices
(In Pak Rupees)
Number of Share
Outstanding
Market Value
(Pak Rupees)
14
50,000
700,000
15
100,000
1,800,000
31
150,000
4,650,000
Total Market Capitalization
7,150,000
So to find the index for this we will use the following procedure
Index = (7,150,000 /6,500,000) *1000 = 1100
Since the formula for calculating KSE-100 index is:
Index = [sum of shares outstanding (current price)/Base period value] multiply by
1000
OR
Index = [Market capitalization /Base divisor] * 1000
THE KSE-100 INDEX RE-COMPOSION:
The re-composition of the index will required semi annually overtime. For the recomposition of KSE-100 index rules falls into two general categories.
41
IR
S
V
M
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IA
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D
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S
N
R
U
R
L
U
E
L
S
E
S
A.
SECTOR RULES
B.
MARKET CAPITALIZATION RULES
C.
RULES FOR NEW ISSUES
A.
SECTOR RULS:
The deletion and selection of companies on the basis of top stock capitalization. The
34 KSE sectors are governed by the two rules recommended for selection criteria.
i)
Time Base Rule

A company can enter into index by becoming the largest in its sector and maintain this
position for two consecutive re-composition periods.
ii)
Value Based rule
42
A company can enter into index by becoming the largest in its sector up to 10%
greater capitalization value than the present largest and maintain this position for one
re-composition period.
A)
Capitalization rule:
Capitalization rule given the selection and deletion of companies on the basis of
among the largest capitalization. Companies in the stock market only time base rule is
applied in this rule.
i)
Time Based rule:

A company can be enter into the index when it exceeds market capitalization value
from the last stock in the index, and maintain this position for the two re-composition
periods. The lowest capitalization company is automatically pushed from the index.
Rules for new issues:
A new listed company can also qualify for the inclusion of index. If its market
capitalization is at 2% of the total market capitalization.
How the Re-composition of KSE-100 index take place?
In re-composition when some companies go out of the index at the same time some
companies are entering the index, so this will affect the index because of the different
size of capitalization of the outgoing companies and the new entering companies. So
to maintain the index same and constant should be made an adjustment in the base
divisor.
Let for the Day 2 KSE-100 index is 1100, and the index market capitalization is
7150000. Let suppose the market capitalization for Day 3rd would be Rs. 1,200,000.
This is because of the addition and deletion of companies on the basis Sector rule and
Market Capitalization rule. This new market capitalization which also known as
Revised Market capitalization is calculated just after the end of closing trading session
on Day 2.
The new divisor for the index for KSE-100 index is as follows.
We know that,
Index =
Market capitalization * 1000

Base divisor
43
New divisor = market capitalization (Day 3)
* 1000
Index (Day 2)
So in order to get the new divisor
New Divisor = 1,200,000 * 1000
1100
Now we will get new divisor (Day 3)
New divisor = 1,090,909
The impact of replacement of stock in the index.
As it is expected that on the Day 3 at the opening of trading the stock W will replace
the stock Y. So for that reason new divisor adjustment is made as we do in the
previous case.
Let stock W has twice the market value of stock Y. By adding stock W to the
index, automatically the total market value will be increase and divisor should also be
increase by the same proportionality. The index will remain the same until the three
days trading begins. Let take an example and replace. The stock Y with stock W
STEP NO # 1
Stock
Stock Price
Number Of share outstanding
14
50,000
700,000
50
167,000
8,350,000
31
150,000
4650,000
Revised market capitalization
13,700,000
So by formula
New Divisor =
revised market capitalization * 1000

Index
New Divisor =
13,700,000
Market Value in PKRs.
* 1000
1100
New Divisor = 12,454,545.45
44
So the new divisor is larger than the previous divisor because of the greater market
capitalization than that of previous market capitalization before replacement.
STEP NO # 2
New divisor application on day 3
Stocks
stock prices (Rs)
No of share outs
M .V (Rs)
14.16
50,000
708,000
51.00
167,000
8,517,000
31.50
150,000
4,725,000
TOTAL
13,950,000
So the index on day 3 will be

Index =
Market capitalization * 1000

New Divisor
13950000
*1000
12454545.45
Index (Day 3)
= 1120
THE ADJUSTMENT OF DIVIDEND:

Say a company XYZ announce cash dividend of 10 percent on its share and the books
of accounts closing date started from the 4th day .now it will adjust the dividend on the
closing of the 3rd day.
Lets take an example how to determine the adjustment of dividend
We suppose that the
The KSE100 Index on the 3rd day
1120
Market capitalization on 3rd day
13950000
45
The 3rd day divisor
12454545.45
STEP # 1
To calculate the revised market capitalization we will first determine Ex-dividend
price of stock X, from this the new divisor for the day 3rd will also be come out.
STOCK X
PAR VAUE OF STOCK X PER SHARE
10 PER SHARE
MARKET VALUE ON 3RD DAY
RS 14.16 PER SHARE
CASH DIVIDEND
10 PERCENT
Amount of cash (Rs) dividend per share
= par value * dividend percentage

= 10
=
=
Price of share at Ex dividend

=
* 10%
10
* .10
1
= Mkt price of share

14.16
cash dividend
-1
= 13.16
Step # 2
The stock X share price is adjusted after the closing of 3rd day now to calculate the
new divisor for the 4th day
Stock
price /share
NO of shares outstanding
Mkt value of shares
13.16
50,000
658,000
W
Z
51
31.50
167,000
150,000
8,517,000
4,750,000
Revised Mkt capitalization
13,900,000
46
For this the new divisor will be

New divisor
= (Revised market capitalization / index of 3rd day) * 1000
New divisor
= (13,900,000 / 1120) * 1000
New divisor
12,410,714.29
STEP # 3
Index on the 4th day
Stocks price of share
no of shares outstanding
Mkt value (Rs)
14*
50,000
700,000
51
167,000
8,517,000
31.50
150,000
4,725,000
Mkt capitalization
13,942,000
Index = (Mkt capitalization / new divisor) * 1000

=
=
(13,942,000 / 12410714.29)
11
47
*1000
CHAPTER # 06
THE FIVE YEARS
PERFORMANCE
OF
ISLAMABAD STOCK
EXCHANGE
48
INCOME AND
EXPENDITURES
2007
2008
2009
2010
2011
REVENUE
79.35
94.76
93.49
117.54
767.66
ADMINISTRATIVE EXPENSES
42.33
58.58
73.15
136.99
168.98
FINANCE COST
NIL
NIL
16.45
76.82
142.27
INCOME BEFOR TAX
39.29
50.59
31.57
548.37
102.64
INCOME AFTER TAX

BALANCE SHEET
27.75
38.37
7.52
285.51
369
PROPERTY AND EQUIPMENTS
1,086.89 1,567.91 2,745.29 2.424.62 2,313.69
INVESTMENT PROPERTY
NIL
NIL
NIL
LONG TERM INVESTMENT
65.92
48.33
88.01
85.78
87.4
CURRENT ASSETS
307.1
268.26
168.28
243.07
285.41
TOTAL ASSETS
1,050.43 1,044.00
1,462.44 1,891.22 3,026.30 3,825.17 3,747.01
FUNDS
389.6
416.81
395.85
690.45
NON CURRENT LIABILITIES
968.18
CURRENT LIABILITIS
104.66
86.68
399.59
381.78
522.85
TOTAL LIABILITIES
1072.84
1474.41
2630.45
1907.85
1460.57
1,387.73 2,230.86 1,526.07
1,075.00
937.72
FIVE YEARS FINANCIAL HIGHLIGHTS OF ISE
Income in the stock exchange araising from trading listing and similar other activities. The
revenue in the income statement was gradually increased during the first two years and come
down slightly in 2008 because of the economic crises in 2008/09. And after that when stock
exchange recovered itself it increases its revenue tremendously in 2010/11.with the
increasing of revenue the administrative expenses also increases respectively. This result
increase in the income after tax because of the increase in total revenue.
In the balance sheet the total assets show much fluctuations on increasing trend and the
liabilities of the stock exchange also increases during the five previous years. Investment
properties of the stock exchange are those assets capitals which are held for rental purposes
49
and not for their own uses and resale purposes. The liabilities in 2008 decreases due the
economic crashed in Pakistani stock market. Then increases after that as total assets of the
Islamabad stock exchange increases.
TOTAL VALUE PIE OF ISE
522.85
PROPERTY AND EQUIPMENTS
INVESTMENT PROPERTY
937.72
2,313.69 LONG TERM INVESTMENT
1,075.00
CURRENT ASSETS
TOTAL ASSETS
3,747.01
NON CURRENT LIABILITIES
1,044.00
87.40
FUNDS
285.41
CURRENT LIABILITIS
This pie represent the total value of the firm which includes the property and equipment,
investment property, long term investment current assets, funds and current and non-current
liabilities of the Islamabad stock exchange. During the years 2011 the total value of the
property and equipment Rs 2313.69 millions. The investment in property is Rs1044 millions,
the long term investment 87.4, the total assets of the ISE is Rs3747.01 millions and the funds
available to ISE Rs1075 million and the noncurrent liabilities is Rs 937.72 and the current
liabilities is Rs1075 millions.
50
FUNDS
1075
1200
1000
690.45
800
600
389.6
416.81
395.85
2008
2009
FUNDS
400
200
0
2007
2010
2011
The stock exchange raises funds through brokerage houses. The commission which is paid on
the each transactions of the securities , the annual fee of brokerage houses, the registration of
securities and that of the investors account so funds for the stock exchange is continuously
increasing during the past five years .
TOTAL ASSETS
3,825.17
4,000.00
3,026.30
3,000.00
2,000.00
3,747.01
1,462.44
1,891.22
1,000.00
0.00
2007
2008
2009
2010
2011
Total assets of ISE increases gradually from year to year by the previous five years
which show a good and healthy sign for the performance of the stock exchange itself
as well as for the stakeholders of the Islamabad Stock Exchange.
51
TOTAL LIABILITIES
2630.45
3000
2500
1907.85
2000
1500
1474.41 TOTAL LIABILITIES
1460.57
1072.84
1000
500
0
2007
2008
2009
2010
2011
As the total assets of the stock exchange increases, the total liabilities are increases for
the first three years and then decreases in the last two years during the previous five
years. The decrease in liabilities shows that there will be increase in the owners
equities. It means the brokers will receive more when decreases in the liabilities.
FIVE YEARS MARKET PERFORMANCE OF ISE
PARTICULARS
TOTAL NO.OF LISTED
SECUTITIES
TOTAL LISTED PAID UP
CAPITAL(RS.Bn)
TOTAL MARKET
CAPITALIZATTION(RS.Bn)
ISE 10 INDEX
NEW SECURITIES LISTED
DURING THE YEARS
LISTED PAID IN CAPITLAOF NEW
CO. (RS.Mn)
TOTAL TURN OVER OF SHARES
IN MILLIONS
AVERAGE DAILY TURN OF
SHARES IN MILLIONS
2006-07
2007-08
2008-09
2009-10
2010-11
266
248
267
269
264
489
551
608.4
715.65
726.96
3060.6
2716
2872
2749.64
1705.02
1713.03
2,261.69
2441.15
2,621.07
2722.83
12
15
13
51733
18599
11881.7
26174.715
NIL
236.853
569
272.97
225.17
37.343
0.96
2.31
1.11
0.9
0.14
The listed paid up capital is increasing from year to year continuously during previous five
years. It means that more and more peoples want to invest in stock exchange. The total no of
listed securities in ISE increase and decrease with the passage of time. The market
capitalization of ISE was 3060.6 billion which decrease to 2621.07 billion due to decrease in
new listed securities. The total paid in capital of new companies show the decreasing trend in
52
the first two years while from 2008 and onward it show the increasing trend in the total paid
in capital.
TOTAL LISTED PAID UP CAPITAL(Rs.Bn)

800
600
489
551
608.4
715.65
726.96
(2009/10)
(2010/11)
400
200
0
(2006/07)
(2007/08)
(2008/09)
It indicates the total capital of the stock exchange which is funded by shareholders. The paid
up capital is less than that up total companys capital. The listed paid up capital is increasing
from year to year continuously during previous five years. It means that more and more
peoples want to invest in stock exchange which is a good sign for the performance of ISE.
TOTAL NO.OF LISTED SECUTITIES

270
265
260
255
250
245
240
235
267
266
269
264
248
(2006/07)
(2007/08)
(2008/09)
(2009/10)
(2010/2011)
This graph show the numbers of listed securities during the previous five years .During
this period the numbers of listed securities was increased and decreased. During the
year 2007the total numbers was 266 and the in 2008 it decreased to 248 due to the
market crashed in 2008.In 2009 this again increased to 267 and the 2010 it increased to
269.during the year 2011 the total listed securities on ISE was 264.
53
TOTAL MARKET CAPITALIZATTION(RS.Bn)

3060.6
3500
2872
2621.07
3000
2261.69
2500
1705.02
2000
1500
1000
500
0
(2006/07)
(2007/08)
(2008/09)
(2009/10)
(2010/11)
This graph of the total market capitalization of the ISE. Total market capitalization of
is equal to the sum of share outstanding multiply by it shares price. The total market
capitalization of the ISE during the 2007 was Rs 3060.6 billion which was decreased
to Rs 1705.02 during the year 2009.Again in 2010 this stared increased and reached
to the Rs 2621.07 billion in 2011.
ISE 10 INDEX
3000
2716
2749.64
2722.83
2441.15
2500
1713.03
2000
1500
1000
500
0
(2006/07)
(2007/08)
(2008/09)
54
(2009/10)
(2010/11)
TOTAL TURN OVER OF SHARES IN MILLIONS

569
600
500
400
272.97
300
236.85
225.17
200
100
37.34
0
(2006/07)
(2007/08)
(2008/09)
(2009/10)
(2010/11)
The graph that the total turns over of the Islamabad stock exchange was in decline from
previous five years. From 2008 the total turnover of the shares decreased from Rs 569
millions to272.97 millions and then Rs 225.17 million in 2010 and it further decreased to Rs
37.343 million during the year 2011.
NEW SECURITIES LISTED DURING THE YEARS

16
14
12
10
8
6
4
2
0
15
13
12
7
NEW SECURITIES
LISTED DURING THE
YEARS
The graph show the numbers of new securities listed during the previous five years. The
numbers of new securities during 2007 was 12 which were decreased to 7 in 2008 due to
economic crises. In 2009 this number increased to 15 and then decreased to 13in 2010.in
2011 just 5 new securities were listed in Islamabad stock exchange.
55
ISE 10 INDEX
3000
2716
2749.64
2722.83
2441.15
2500
2000
1713.03
ISE 10 INDEX
1500
1000
500
0
(2006/07) (2007/08) (2008/09) (2009/10) (2010/11)
The index of Islamabad Stock Exchange which is ISE 10 index shows much fluctuation
during the previous five years. In 2008/09 it goes down from 2749.64 to 1713.03 points
because market crashed in 2008. But after that it recover itself again and started increasing
and reached to 2441 points during 2010, and during the year 2011 its comes to 2722.83
points.
56
GLOSSORY
THE TERMS USED IN
STOCK EXCHANGE
THE TERMS USED IN ISLAMABAD STOCK EXCHANGE

1.
Stock / share
The smallest part of ownership in a company is called the share. When an investor
purchased the share of the company he becomes the owner of that company.
Types of stocks/ shares
57
cSp
rot
o
em
c
fm
oke
rns
r
ds
st
to
oc
kc
ks
s
I.
Common stock :
Common stock holders are the owner of the company. They have the right of vote to
elect the board of directors. Common stockholders received dividend but after the
preferred stock holders.
II.
Preferred stock :
Preferred stock holders have no right of vote. They have preference over the common
stock holders in dividend payment. Dividend is pay before to preferred stock/share
holders and then to common share holders.
2.
Capital gain:
It is the appreciation in the price of the share. When the selling price of the share is
increased from its buying price of the share, such increase is called capital gain.
Capital gain comes due to certain reasons such as political environment, economic
conditions settlement, good performance of the company etc.
3.
Bullish trend:
When the price of the all shares increases due to more demand and less supply or any
other reason, it will be said that there is a bullish trend in the market.
4.
Bearish trend:
Bearish trend is opposite to bullish trend, in this the prices of all the shares come
down. The prices of the share come down due to more supply and less demand of
shares on the market.
5.
Dividend:
58
Dividend is that part of earning which is distributed among the share holders.
Dividend is paid to shareholders of the company. Some companies are not paying
dividend which do not pay dividend usually give capital gain. Divided have two
types.
SCD
AOI
CSV
HKI
D
VE
DN
ED
I
I
N
D
I.
Stock Dividend:
It is the type of dividend in which additional shares is given to shareholders of the
common stock. By the stock dividend the ownership of the shareholders remains
unchanged. The par value of the share is also not reduced.
II.
Cash dividend:
This is the payment of dividend in cash form to shareholders on each share they have
own of the company.
6.
Stock split:
When the number of shares is increased and its par value is decreased, is known
as
stock split. A company usually goes on stock split when the company wishes a
substantial reduction in the market price per share of common stock.
7.
Initial public offerings (IPO)
59
IPO stands for initial public offerings. When the company wants to issue shares for
the first time to public this is called the IPOs. IPO are traded in the primary market.
8.
Authorized shares:
It is the maximum numbers of shares which a company can issue without any change
in charter.
9.
Issued shares:
These are the authorized shares which are sold out in the market.
10.
Outstanding shares:
These are the issued shares which are actually held by the general public.
11.
Treasury stocks:
These are the stocks which are repurchased by its respective company and hold it with
her.
12.
Right issue:
Sometime companies need more money or finance, so to meet its need company may
issue more shares in the market to generate money through internal financing. It is a
choice for the company to that it offers these new issues first to its existing
shareholders. As it is the right of current shareholders to purchase new issue shares.
So by this option the right of ownership will remain in the hands of existing
shareholders. But if the current shareholders are not interested in the purchase of new
issue of shares then after some days the right is transferred to the general public in the
market.
13.
Par value:
The face value or the original value of share is known as par value.
14.
Book value:
It is the value listed in the balance sheet and is shareholders equity _ total asset minus
liability and preferred stocks divided by the numbers of share outstanding.
15.
Market price:
It is the price of the share which is currently prevailing in the market

16.
Portfolio :
It is rare to find investors investing their entire savings in a single security. Instead,
they tend to invest in a group of securities is called portfolio. Creation of portfolio
helps to reduce risk without sufficient returns.
17.
Term Finance Certificate(TFCs):
60
These are just like bonds which are issued by the companies to generate the funds
from general public. The investor receives interest from the companies by purchasing
their TFCs.
18.
Exchange membership:
There are four types of exchange membership.

1E
x
c
h
a
n
g
e
m
e
m
b
e
r
s
I.
Specialist:
These members are also known as market maker. Specialists perform two major roles,
first they serve as a broker to match buy and sell orders and handle special limit
orders with member brokers. Second major role of the specialist is to act as a dealer to
maintain a fair and orderly market.
II.
Commission broker:
These are the members who buy and sell (trading) on the behalf of his customer
(investor). He receives commission for rendering this service from both the parties the
buyer and the seller.
III.
Floor broker:
This is the independent member of stock exchange and who acts as a broker on the
behalf of other members.
IV.
Register traders:
These are the members who use their membership to buy and sell for their own
account. They save commission on their trading.
61
Types of orders
O
M
L
S
r
ia
h
p
rd
m
o
e
e
rik
c
r
ite
ts
a
o
ls
ro
a
r
ld
o
d
re
re
d
r
s
e
rs
s
I.
Market order:
It is an order which is given by the investor to his commission broker to buy or sell a
security at the best current price.
II.
Limit order:
In this order an individual placing a limit order specifies the buy or sell price. For
example if the price of the Engro company private limited is currently at Rs: 40 and
Mr. A wants to buy it only when its price come down to Rs: 35, so Mr. A will
62
specifies the limit order to his broker, and when the share price drop to Rs: 35 the
broker will buy the share for Mr. A.
III.
Short sale:
When an investor know about a specific share that it has been overpriced and after
some time its price will come down. So to take advantage of this overpriced security
the investor borrow that specific share from another investor through his broker and
sell it in the market and earn profit. So in this type the investors do not purchase the
stock and own it. When the price of this share decreased from its selling price, the
borrower investor purchase it and give back it to the lender investor from whom he
borrowed the share when it was overpriced.
IV.
Special orders:
Special orders or further categorized into two orders.

i.
Stop loss order:

This is the order in which an investor want to minimize his/her loss when intent to sell
the stock. For example if an investor purchase a stock at Rs: 40 and he expect that it
will go up in the future. But in real when it not happen to the expectation of the
investor and the price of is dropped. Now to protect himself from more loss, he would
put stop loss order and will order to his broker that if the price dropped to Rs: 35 then
sell it. After sometime when the stock price dropped to Rs:35 then his stop loss order
would become a market sell order and the stock would be sold at prevailing price
(35).
ii.
Stop buy order:

In this type those investor are involved who entered into short sale. These short sale
investors want to minimize their loss when stock price begins to increase in value and
crossed short sale price. For example if a share is sold out by any investor at short sale
price at Rs: 40 and he expect that it will come down to the price Rs: 35, he will
purchase it and return it back to the lender. Suppose he was wrong in his expectations
and the price of the stock begin to increase, so to limit or minimize his loss he would
stop buy order and say to his broker that if the stock reach to Rs 45 the buy it. So
when price of the stock goes up to Rs 45 his stop buy order will become market buy
order and the broker will purchase the stock for the investor. So the stop buy order
limit any loss on the short sale to approximately Rs 5 a share in this case.
63
19.
Long position :
This is the position in which investor belief that in some future time the price of the
stock will be rise and due to that reason investor purchase the stock. The investor sell
this stock when the price of the stock goes up and earn profit.
20.
Short position :
In this position the seller does not own the security they only borrow the security from
broker and sale in the open market at current price with the expectation that the
security price will be fall down in future and the security will be back to the broker
from which it was borrowed.
21.
Margin transaction:
Margin transaction means buying the security without having the enough cash. In
margin transaction, the investors provide a portion of cash to buy the security and
borrow the rest of money from broker.
For example if you want to buy 10000 shares of xyz company and each share is at the
rate of Rs 10 then the total amount need to make the transaction is Rs100000, but the
investor have only Rs 60000 so the investor have the option to make margin
transaction by investing Rs 60000 of own and borrow the rest of money Rs 40000
from the broker.
22.
Margin call:
When the value of the stock fall down below the purchase price the broker will give
margin call to the investor to deposit the additional money in the margin account. The
broker give margin call to the investor three time, when the investor does not reply on
third time then the broker have the right to sale the stock.
There are so many others terms used in the stock exchange but we have discussed
only few of them
64
SUGGESTIONS
AND
RECOMMENDATIONS
SUGGESTION AND RECOMMENDATIONS:

For the betterment of Islamabad stock exchange we recommended some suggestions
which are the following
INCREASE THE NUMBER OF STOCK EXCHANGES:
65
If we compared the number of stock exchanges with India, where 23 stock exchanges
are currently in operations which give an easy access to the investors of India. While
in Pakistan just 3 stock exchanges are exist.
In which 2 Stock Exchanges are
operating in Punjab while the third one is in Karachi, no Stock exchange is exist in the
area of Baluchistan and KPK, it will be good decision to established Stock exchanges
in these as well as in the northern areas area of Pakistan to provide easy access to the
investors of that areas.
AWARNESS OF INVESTORS:
In Pakistan there is lack of awareness of investment in stock exchanges. Only one
percent (1%) people of Pakistan invest their savings in stock exchanges while in India
and Bangladesh 16% people invest their savings .thats why their GDP is more than
our country. So to attract and aware the people of Pakistan about investment the
government and the stock exchange should arrange programmes and seminars.
INVESTOR EDUCATION:
Stock exchanges should need a programmes to guides the investor that how to make
their investments profitable. For this purpose they should used print media as well as
electronic media to give and educate the investors about the investment.
INVESTORS FRIENDLY ENVIROMENT WOULD BE CREATE:
If the stock exchange and government takes such step to maintain and create friendly
environment in the stock exchange it will attract more and more local as well as
foreign investors.
MAKE RELAXATION IN TAX POLICY:
If the taxes which are impose on the profit and the capital gain of the investor is
reducing it will also attract the investors toward the stock exchange. In so many
countries the capital gain of the investor is tax free. So the ISE would also take this
step.
MINIMIZE THE BROKERGE HOUSE SECURITY:
The security for the broker is about 7.5 millions which is a huge amount. If this
amount is minimise this will also give positive impact on the stock exchange.
INCREASE THE INVESTOR PROTECTION FUND (IPF):
66
To protect the investor and keep is interest the stock exchange established a fund
which is called the investor protection fund (IPF). This is good step but it fund given
to this is very low so it would also required to increase.
INCREASE THE SALARIES OF THE EMPLOYEES:
For the motivation of the employees of the stock exchange it very necessary to
increase his salaries and also give them bonuses time to time. The employees
performance would be evaluate and the best performance award should be given to
the best employee.
DEMUTIUALIZATION OF STOCK EXHANGE:
Now a day the stock exchange is a mutualised and Non-profit organization. Only the
stock exchange members have the right of trading and ownership. By demutualising
the stock exchange will become the profit entity give the right of ownership and
trading to the shareholder. The demutualization of stock exchange will increase the
transparency, numbers of investors and also improve the liquidity of the market. The
demutualization of stock exchange will also improve the governance and attract the
international strategic investors. So due to the above advantages of the
demutualization of a stock exchange we recommended that the stock exchange of
Pakistan should be demutualised.
67
CONCLUSION
After studying the stock market we have come to the point the point that stock market play
very crucial and important role in the economy of a country. Now days the economists of the
world when conducting the survey regarding the economic conditions of the country they use
the stock market as indicator.
The financial statements of the current year of the Islamabad stock exchange revealed that
the performance of the ISE is going well and better than the previous years.teh ISE 10 index
show much fluctuations from 2008 to 2011/12. The index of the ISE increase from 1731 to
2722 points. The total market capitalization of the ISE is also increased, but the numbers of
the listed companies on ISE has slightly decree in 2012. The management of the ISE is highly
professional, efficient, cooperative, and hard working. The trading system of the ISE is now
fully electronic, due to which the chances of the fraud has been reduce, which is good sign of
improvement of the ISE system.
Recently a bill for the demutualization of the Pakistani stock exchanges has been passed from
the parliament of Pakistan. This system will be launch soon in the coming months. The
68
Islamabad Stock Exchange is fully ready for the adoption of demutualization system. This
system will change the ownership system of the stock exchange .through demutualization of
stock exchanges the ownership will be transferred from the stock brokers to investor, which
will increased the trust of the foreign as well as the local investors.
REFERENCES
We have use different sources for the data collection for the project.
Falki capital brokerage house Islamabad stock exchange.
Islamabad stock exchange secretariat.
Annual reports of ISE.
Questioners from Islamabad stock exchange members.
Questioners from the investors present on ISE floor.
www.ise.com.pk.
www.kse.com.pk.
www.lse.com.pk
www.google.com.
www.wikipedia.com.
www.investopidia.com.
69

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Project Report On Islamabad Stock ExchangeIse - 2

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A Project Report on Islamabad Stock Exchange

A project report submitted to the Department of Accounting & Finance, Faculty of

MASTER OF BUSINESS ADMINSTRATION

Department of Accounting & Finance

A project report on Islamabad stock exchange

MASTER OF BUSINESS ADMINISTRATION

Department of Accounting &Finance

Copyright2012 by Mr. Manzoor Ahmad and Mr. Muhammad Idrees.

Mr. Ch Mazhar Hussain

Dr. Zaheer Abbass

We want to dedicate this project to our parents

Who pray for our success and to my teachers who guide us in

The whole of our education.

INTRODUCTION AND EVALUTION OF STOCK EXCHANGE

WHAT IS STOCK EXCHANGE

EVOLUTION OF STOCK EXCHANGE

HISTORY OF STOCK EXCHANGE IN PAKISTAN

THE STOCK EXCHNGES OF PAKISTAN

THE KARACHI STOCK EXCHANGE (KSE)

THE LAHORE STOCK EXCHANGE (LSE)

ISLAMABAD STOCK EXCHANGE

THE ISLAMABAD STOCK EXCHANGE MAIN OBJECTIVES

MISSION & VISION

ROLE OF STOCK EXCHANGE

DUTIES AND RESPONSIBILITIES

REGULARITRY STRUCTURE OF THE ISE

CENTRAL DEPOSITRY COMPANY

HOW CDC WORK WITH STOCK EXCHANGE

SERVICES PROVIDED BY CDC

THE CENTRAL DEPOSITORU SYSTEM

THE SERVICES OF NCCPL

TRADING PROCEDURE AND INDEX CALCULATION

TRADING PROCEDURE OF ISE

ISLAMABAD STOCK EXCHANGE INDEX

METHODOLOGY FOR THE CALCULATION OF INDEX

THE FIVE YEARS PERFORMANCE HIGHLIGHTS OF ISE

FIVE YEARS FINANCIAL PERFORMANCE OF ISE

PIE CHART OF ISE

TOTAL ASSETS CHART

TOTAL LIABILITIES CHART

FIVE YEARS MARKET PERFORMANCE OF ISE

TOTAL PAID UP CAPITAL

TOTAL NUBERS OF LISTED COMPANIES

TOTAL MARKRT CAPITALIZATION

THE ISE10 INDEX CHART

KSE STATESTICS AND INDCES ON 24, APRIL 2012 TABLE

CDC STATESTICS TABLE

INDEX CALCULATION STAGE # 1 TABLE

THE REPLACEMENT OF INDEX STEP # 1 TABLE

STEP # 2 TABLE FOR NEW DIVISOR

ADJUSTMENT OF DIVIDEND STEP # 2 TABLE FOR NEW DIVISOR

FIVE YEARS FINANCIAL HIGHLIGHTS OF ISE TABLE

FIVE YEARS MARKET PERFORMANCE OF ISE TABLE

INITIAL PUBLIC OFFERINGS

CHIEF FINANCIAL OFFICER

UNIFIED TRADING SYSTEM

KARACHI STOCK EXCHANGE

JOINT STOCK COMPANY

LAHORE STOCK EXCHANGE

ISLAMABAD STOCK EXCHANGE

KARACHI MEEZAN INDEX

CHIEF EXECTIVE OFFICER

TERM FINANCE CRTIFICATE