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Assignment No2 PM
Assignment No2 PM
SEMESTER: 4th
FAISALABAD CAMPUS
What is the stock Exchange?
Stock exchange is a place where shares in companies are bought and sold
Some of the Important Functions of Stock Exchange/Secondary Market are listed below:
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
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
PSX aspires to be one of the leading Exchanges of the world having an enviable record of being
the best performing Stock Exchange in Asia. In recent past PSX had an All Index Growth of
26% Annual CAGR from 2012-2017. PSX aims to reclaim that status and has plans in place to
make it a robust and efficient Stock Exchange at par or above par with other Stock Exchanges in
the world. It is at the forefront of Pakistan’s economy, being the only major institution helping
capital formation in the country. Pakistan Stock Exchange has in place functional and operational
capabilities at par with any global Stock Exchange with robust trading systems (e.g.: KATS-
Karachi Automated Trading System, KITS-Internet based order routing system, BATS-Bonds
Automated Trading System), IT security systems, and a progressive regulatory framework.
Currently, 7 indices are listed on PSX as follows:
The objective of PSX is to provide a safe, reliable, efficient and consistent marketplace where
investors can buy and sell common stock of listed companies and other securities. For over 60
years, the Exchange has facilitated capital formation, serving a wide spectrum of participants,
including individual and institutional investors, the trading community and listed companies.
Pattern of Shareholding
PSX constitutes of 40% shareholding by a consortium of Chinese investors (Shanghai Stock
Exchange, Shenzhen Stock Exchange, & China Financial Futures Exchange), and 60% by
general public, which includes initial shareholders, local and foreign investors.
Procedure Of Accout Opening In Pakistan Stock Exchange:
According to your personal preferences and requirements, you can first select from a number of
brokerage companies available on the PSX website to choose a stock broker. After being
shortlisted, you can choose your brokerage company based on the following criteria:
Easy to communicate and understand your defined investment goals.Quality of investment
advice.Provide research materials.Availability of online trading tools.Provide trade
confirmation.Collect brokerage fees.Physically close to your workplace or home
After selecting a stock broker, you will have to fill out a standardized account opening form
(SAOF) for your brokerage account. This will also enable your CDC sub-account. A CDC sub-
account is an account where your stock is placed for trading purposes. When you buy shares, the
account will be credited in the same way, and when you sell shares, the opposite will be credited.
A brokerage company may have many sub-accounts, while its master or participant account may
have only one. As an investor, you can compare it to the authenticity of the account opening
form (and its terms and conditions) provided by the brokerage company and compare it to the
SAOF available on the PSX website.
After filling out and signing your account opening form, you will need to deposit a minimum
amount to start investing in the stock market. Make sure the same amount is deposited by check.
It is also recommended that you keep abreast of the taxes and fees charged by the Stock
Exchange, Central Depository Limited, the National Clearing Corporation of Pakistan, the
Securities and Exchange Commission of Pakistan and the Federal Revenue Commission on your
transactions to be listed on the stock exchange.
After opening an account and depositing your first payment, you can invest in the stock market.
Make sure you get transaction confirmations and buy and sell instructions from your
stockbroker. You also have the right to receive account ledgers and statements from your
stockbroker on a regular basis to understand your account activity.
1.CNIC Copy
2. Bank statement
3.salery slip
4.uitility bill copy
5. Next of kin cnic copy (blood relative like, brother, father etc)
6.cheque for until Deposit
Over-The-Counter
Stocks that trade via OTC are typically smaller companies that cannot meet exchange listing
requirements of formal exchanges. However, many other types of securities also trade here.
Stocks that trade on exchanges are called listed stocks whereas stocks that trade via OTC are
called unlisted stocks.
OTC securities trade by broker-dealers who negotiate directly with one another over computer
networks and by phone using the OTCBB. The dealers act as market makers using the Pink
Sheets and the OTC Bulletin Board, which is provided by the National Association of Securities
Dealers (NSAD).
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.