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ASSIGNMENT NO.2

COURSE TITLE: PORTFOLIO MANAGEMENT

STUDENT NAME: BABAR SHAHZAD

REGISTRATION NO: 0019

CLASS: M.COM (8A)

SEMESTER: 4th

DATE OF SUBMISSION: 01-05-2020

TUTOR: PROF. SAQIB MASOOD

DEPARTMENT OF BUSINESS ADMINISTRATION

UNIVERSITY OF CENTRAL PUNJAB

FAISALABAD CAMPUS
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The Role of the Stock Exchange in the Economy

Stock exchanges play a vital role in the functioning of the economy by providing the backbone to
a modern nation's economic infrastructure. Stock exchanges help companies raise money to
expand. They also provide individuals the ability to invest in companies. Stock exchanges
provide order and impose regulations for the trading of stocks. Finally, stock exchanges and all
of the companies that are associated with the stock exchanges provide hundreds of thousands of
jobs.

Business Expansion

Stock exchanges provide companies the ability to raise capital to expand their businesses. When
a company needs to raise money they can sell shares of the company to the public. They
accomplish this by listing their shares on a stock exchange. Investors are able to buy shares of
public offerings and the money that is raised from the investors is used by the company to
expand operations, buy another company or hire additional workers. All of this leads to increased
economic activity which helps drive the economy.

Widespread Investing

Stock exchanges allow any person to invest in the greatest companies in the world. Investors,
both large and small, use the stock exchanges to buy into a company's future. Investing would
not be possible for the average person if there was not a centralized place to trade stocks. The
ability for the average person to invest in these companies leads to increased wealth for the
investors. This increased wealth then leads to additional economic activity when the investors
spend their money. 

Increased Investor Class

The stock exchanges provide order and regulation to the process of stock trading. Without the
regulations and the shareholder protections that the stock exchanges provide few people would
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be willing to invest in stocks. Because of the oversight of the stock exchanges the average person
has the confidence to invest in stocks and this leads to more people become a part of the investor
class. The investors' wealth grows over time, which allows them to contribute more to the
economy.

Direct Jobs

The stock exchanges and all of the companies that serve the stock exchanges such a brokerage
firms, investment banks and financial news organizations employ hundreds of thousands of
people. Most of the jobs related to stock exchanges are well paying and career orientated jobs.
As a result, the employees of these firms are able to help spur economic activity.

Warning

If the stock exchanges do not fully carry out their duty of overseeing the stock trading process
the investing public will lose faith in the fairness and safety of the stock market. If this happens
then all of the economic activity that the stock exchanges create will decrease and this will lead
to an overall drop-in economic activity. The stock exchanges must be sure that investors are not
taken advantage of and that investors continue to have confidence in the system the stock
exchanges created.

Raising Capital

Stock markets are, first and foremost, financial institutions established to help businesses and
entrepreneurs come together to buy, sell and trade shares for the purpose of providing capital to
enterprises that need it. Was it not for stock exchanges, entrepreneurs would be left to their own
devices to find investors, and consumers could wind up at the mercy of unlicensed and
unregulated financial products with no oversight? Emerging from the stock market system are
unique financial terms and concepts including initial public offerings, or IPOs, an international
acronym for new business stock introductions.
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Servicing Investors

Another role of stock market is to act as an intermediary for large and small investors seeking to
make money outside the realm of standard banking institutions. The role of a stock exchange in
an economy is to maximize return on savings that might otherwise languish in static bank
accounts with low returns. Stock exchanges promise and often deliver higher profits, and in
return, investors receive measures of assurance, diverse opportunities and flexibility. Further, a
stock exchange offers investors assurances via formal oversight on investments.

Indicator of Health

A stock exchange can serve as a barometer of a nation’s fiscal health, broadcasting the ups,
downs, trends and shifts of the domestic economy. According to financial website UpDown’s
Investment Education Center, the relationship between a society and its stock exchange is so
deeply embedded that analysts can influence both the domestic economy or the stock market it
relies on by signaling optimistic outlooks for even just one of the two.

Financial Accountability

Sophisticated financial market systems require credibility and accountability if they are to
function on behalf of businesses and investors as interested in ethics as they are in profits. For
this reason, a stock exchange benefits from a formal structure upheld by rules, laws and
regulations. Management and operational standards set by governments, bureaus and agencies
overseeing stock exchange operations add authority and oversight to the institution, giving
stockholders, investors and businesses checks and balances necessary for investor confidence.
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Pakistan Stock Exchange Limited (PSX):

Brief History:

Pakistan Stock Exchange Limited (PSX) (formerly: Karachi Stock Exchange (Guarantee)
Limited (KSE) was established on September 18, 1947. It was incorporated on March 10, 1949.
Only five companies were initially listed with a total paid-up capital of 37 million rupees. The
first index introduced in KSE was based on fifty companies and was called KSE 50 index.
Trading used to be carried out on open out-cry system. Computerized trading system called
Karachi Automated Trading System (KATS) was introduced in 2002 with a capacity of 1.0
million trades per day and the ability to provide connectivity to an unlimited number of users.

In October 1970, under the Securities and Exchange Ordinance of 1969 by the Government of
Pakistan, a second stock exchange was established in Lahore in response to the needs of the
provincial metropolis of the province of Punjab. It initially had 83 members and was housed in a
rented building in the crowded Bank Square area of Lahore. The LSE was the first stock
exchange in Pakistan to use the internet.

Yet another stock exchange known as Islamabad Stock Exchange was established in Islamabad,
the capital city of Pakistan on October 25, 1989 with the main object of setting up of a trading
and settlement infrastructure, information system, skilled resources, accessibility and a fair and
orderly market place that ranks with the best in the world and to cater to the needs of less
developed areas of the northern part of Pakistan. It was licensed as a stock exchange on January
7, 1992.

All these three exchanges had separate management, trading interfaces, indexes, listing criteria
etc. and thus had no mutual links to each other. All three exchanges were previously operating as
a non-profit organization with mutualized structure wherein their respective members had
trading as well as ownership rights. This structure inherently created conflict of interest and
perceived to jeopardize the investors' interest. Therefore, the Stock Exchanges (Corporatization,
Demutualization & Integration) Act, 2012 (known as "Demutualization Act") was promulgated
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by the Government. As a result, these three exchanges were merged together to form a new
combined exchange called Pakistan Stock Exchange Limited (PSX) which started its operations
on January 11, 2016 under this new title.

As provided under the aforesaid Demutualization Act, now Members have ceased to be Members
of PSX and they have been issued Trading Right Entitlement Certificates ("TRECs") and PSX's
ownership shares, thus separating trading rights from ownership rights. Whereas TRECs
represent trading rights, PSX shares represent ownership. Now, TREC holders need not be a
shareholder of PSX nor a PSX shareholder is required to be TREC holder of PSX.

As envisaged under the provisions of the Demutualization Act, regulatory functions have been
segregated from commercial functions of PSX, so that regulatory functions are not compromised
for achievement of commercial objective of generating revenue. Moreover, under the provisions
of the said Act, after demutualization, persons representing TREC holders on the PSX Board
shall not be in majority and the Act also envisages divestment of shares of TREC holders held in
their blocked accounts to strategic investors and general public/financial institutions within a
certain time limit.

Karachi branch of Pakistan Stock Exchange is located on Stock Exchange Road, in the heart of
business district of Karachi. The premises is known as Stock Exchange Building.
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Procedure of Account Opening in PSE:

Enclosures (for individuals):

 Attested copies of National Identity Card of the applicant.

 Attested copies of National Identity Card of the Joint Holders and or Nominee(s) (if
applicable)

 Attested copies of passports of the applicant, Joint Holders and or Nominee(s) (in case of
non-residents)

 Copy of the letter of authorization from the Account Holder(s) of the person authorized to
trade in my/our accounts (if other than the account holder).

 A list of Transaction fee, Commission to be charged by the Broker and other CDC
charges to be levied.

Enclosures (for corporate entities):

 Certified true copy of Board Resolution (specimen provided as per Annexure-A below).

 Certified true copies of Memorandum & Articles of Association.

 List of authorized signatories.

 List of nominated persons allowed placing orders

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[NAME OF THE BROKER]

Broker, ___________ Stock Exchange
(Address of Head Office and concerned Branch Office)

Broker Registration No. _______________________

ACCOUNT OPENING FORM

NOTE 1: EACH AND EVERY COLUMN MUST BE FILLED IN

NOTE 2: EACH PAGE OF THIS FORM WILL BE DULY SIGNED BY THE ACCOUNT HOLDER(S) AND THE BROKER
NATURE OF ACCOUNT:
SINGLE: JOINT: CLIENT ID / ACCOUNT NO.

COMPANY: FIRM: CDC ACCOUNT NO.

ACCOUN T H O LD ER JOINT ACCOUNT HOLDER

ACCOUNT TITLE/ NAME:____________________________ ACCOUNT TITLE/NAME: _____________________________

ADDRESS: _____________________________________
________________________________________________
TEL: ___________________________________________
E-MAIL: _________________________________________
FAX NO: ________________________________________
PERMANENT/REGISTERED ADDRESS: ______________
________________________________________________
ADDRESS: ________________________________________
__________________________________________________
TEL: _____________________________________________
E-MAIL: ___________________________________________
FAX NO: __________________________________________
PERMANENT ADDRESS: ____________________________
__________________________________________________

F o r in d iv id u a l s o n ly :

DATE OF BIRTH: _________________________________ DATE OF BIRTH: ____________________________________

NATIONALITY: __________________________________
STATUS: ________ RESIDENT _______ NON-RESIDENT
GENDER: _______ MALE ___________ FEMALE
FATHER'S/HUSBAND'S NAME: _____________________
NATIONAL IDENTITY CARD NO. (IN CASE OF NON
RESIDENT PASSPORT NO.): _______________________
OCCUPATION: __________________________________
NATIONALITY: ______________________________________
STATUS: _________ RESIDENT _______ NON-RESIDENT
GENDER: ________ MALE ___________ FEMALE
FATHER'S/HUSBAND'S NAME: ________________________
NATIONAL IDENTITY CARD NO. (IN CASE OF NON
RESIDENT PASSPORT NO.): __________________________
OCCUPATION: _____________________________________

For C om p a nie s o r F ir m s o n ly :

Company Registration No. __________________________

STATUS: _______RESIDENT ________ NON-RESIDENT

Declaration of Solvency

The Account Holder hereby declares that:

a) It has not applied to be adjudicated as an insolvent and that it has not suspended payment and that we have not
compounded with our creditors;
b) It is not un-discharged insolvent; and
c) It has not been declared defaulter in repayment of loan of a bank/financial institutions.

Name of Authorized Persons to operate the account

The account shall be operated by the following:

N am es Specimen Signature Singly/Jointly

(a) ________________________________ _________ ______ _ _________ __
(b) ________________________________ _______________ _ _________ __
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(c) ________________________________ ________________ ___________

The authority of the person(s) authorized to operate the account will be clearly spelled out in the letter of authorization from the
Account Holder.

MARGIN DEPOSIT

The Account Holder(s) hereby undertakes to deposit and maintain ____ % margin against his/her/their outstanding
trades/exposure for the purpose of trading in his/her/their account. The broker shall notify the Account Holder(s) about any
change in the above margin requirements for the already executed trades at least 3 working days prior to the implementation
of the revised margin requirements.

CLIENT BANK DETAILS (OPTIONAL): A C C O U N T ( S ) W IT H O T H E R B R O K E R (S ) (O P T I O N A L )

N AME O F TH E BROKER C L IE N T
B R O K E R (S ) EXC H AN G E ID /A C C O U N T
NAME OF THE BANK: _________________
SAVINGS/CURRENT A/C NO.:___________
BRANCH ADDRESS:___________________

NOMINATION:

(In the event of death of the Account Holder, the nominee shall be entitled to receive securities/cash available in the accou nt of
the account holder after set-off against losses/liabilities in the account.)

OPEN YOUR BROKERAGE ACCOUNT:

After the selection of your brokerage firm, you will open a Brokerage Account. You must ensure
that the said Account is opened in your name. You will be given a Client Identification Number
or an Account Number against this account. Read the terms & conditions prescribed in the
Account Opening Form and make sure that they match with the Standard Account Opening Form
available on the PSX website.
Subsequently you will open a CDC Sub Account. The CDC Sub Account is the account through
which you can actually trade in the stock market.
You are also encouraged to open a CDC Investor Account. This account is opened at the CDC,
thereby adding to greater safety and individual custody of your shares.
You must make sure that you are assigned a Unique Identity Number (UIN). It is this number
against which all your brokerage accounts and transactions will be recorded.
You will also need to deposit initial funds to purchase shares. Make sure that it is not a cash
deposit.
PLACE YOUR ORDER & GET CONFIRMATION:

Once you have decided which companies’ shares to buy, you should place your orders through
your stock-broker (or through the online application provided by your brokerage firm)
After placing the order and execution of the same, you should get a Trade Confirmation against
your executed order
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ROLE OF OVER THE COUNTER MARKET IN PAKISTAN

The OTC Markets Group operates some of the most well-known networks, such as the Best
Market (OTCQX), the Venture Market (OTCQB), and the Pink Open Market. Although OTC
networks are not formal exchanges such as the NYSE, they still have eligibility requirements.
For example, the OTCQX does not list the stocks that sell for less than five dollars—known as
penny stocks—shell companies, or companies going through bankruptcy. The OTCQX Best
Market includes securities of companies that have the largest market caps and greater liquidity
than the other markets.

Through the OTC marketplaces, you can find the stocks of companies that are small and
developing. Depending on the listing platform, these companies may also submit reports to the
Securities and Exchange Commission (SEC) regulators. OTCBB stocks will usually have a
suffix of "OB" and must file financial statements with the SEC.

Another trading platform is the Pink Sheets and these stocks come in a wide variety. These
businesses do not meet the requirements of the SEC. While buying shares of this nature may
involve less transactional costs, they are prime for price manipulation and fraud. These stocks
will usually have a suffix of "PK" and are not required to file financial statements with the SEC.