Stock Exchange

What is trite Exchange? A post exchange is the food groceryplace place for the secure and sale of second hand securities. It get outs calling facilities for computer storage brokers and traders, to trade shares of the listed companies and former(a) financial instruments such as Term Finance Certificates and Derivatives. form exchanges also provide facilities for the issue (listing), redemption (delisting) of securities and other bully events including the fee of income and dividends. It is a key institution for gleam functioning and steady growth of the corporate sector and jackpot be seen as a key to the economic life of a nation. run exchange is the home of the capital and pivot of the money commercialise place, providing proper mobility for capital. The securities of joint- gun seam companies, government securities and securities issued by semi-government organization are dealt with on a stock exchange. History of Stock Exchange The history of stock exchanges whor emonger be traced to 12th century France, when the scratch line brokers (the role of an individual or a firm when it acts as an agent for a customer and charges the customer a commission for its services) are believed to eat up developed, trading in debt and government securities.Unofficial share markets existed across Europe through the 1600s, where brokers would relate outside or in coffee houses to make trades. The Amsterdam Stock Exchange, created in 1602, became the root official stock exchange when it began trading shares of the Dutch East India Company. These were the first conjunction shares ever issued. By the early 1700s on that point were fully operating(a) stock exchanges in France and England, and America followed in the later part of the century. trade exchanges became an important way for companies to raise capital for seatment, while also offering investors the prospect to share in company profits.The early days of the stock exchange experienced many scandal s and share crashes, as there was little to no law and almost anyone was allowed to participate in the exchange. Today, stock exchanges operate around the humanness, and they pass on become highly regulated institutions. Investors wanting to buy and sell shares must do so through a share broker, who pays to own a seat on the exchange. Companies with shares traded on an exchange are said to be listed and they must meet specific criteria, which varies across exchanges.Most stock exchanges began as floor exchanges, where traders made deals case-to-face. The largest stock exchange in the world, the impudently York Stock Exchange, continues to operate this way, but most of the worlds exchanges have now become fully electronic. Functions of Stock Market ? Ready Market Stock exchange is a continuous market for the resale of existing securities. It is a nerve where buyers and sellers assemble to deal in securities at any time during the business hours. It enables investors to realize quickly their shares and debentures.This facility encourages people to invest in business enterprisingness by means of buying industrial securities. It helps new investors to obtain securities at any time at market price. ? Protection to investors Protection of the interest of the investors is another(prenominal) function of stock exchange. This it does by ensuring safety and fair dealing to the average investors through strict enforcement of its rules and regulations. Without the cover of a stock exchange there may be unfair competition between different brokers. The investors may be deceived by clever and dishonest brokers.In a stock exchange any malpractice by a broker carries a severe penalty. ? Profitable use of bullion Another major function of the stock exchange is the mobilization of surplus capital of individuals firms and companies for investment in industrial securities. Without the stock exchange, these funds would have remained idle. It directs the surplus funds in to the most profitable channel and thereby secures their effective utilization. People invest their savings in companies yielding good returns. Stock exchange in Pakistan In Pakistan there are three stock exchanges, ? Karachi stock exchange (KSE) Lahore stock exchange (LSE) ? Islamabad stock exchange (ISE) Karachi Stock Exchange The KSE is the first stock exchange of Pakistan established in September 18, 1947 and incorporated in knock against 10, 1949. KSE start with 5 companies with a paid-up capital of RS 37 million. The first index was the KSE 100 index. KSE Indices Family ? KSE 100 The KSE100 index is a benchmark by which the stock price performance can be compared to over a finale of time. In particular, the KSE 100 is designed to provide investors with a sense of how the Pakistan equity market is performing.Thus, the KSE100 is similar to other indicators that track various sectors of the Pakistan economic activity such as the gross national product, consumer price index, etc . The KSE-100 baron was introduced in November 1991 with stand harbor of 1,000 institutionalises. The Index comprises of 100 companies selected on the basis of sector representation and highest market capitalization, which tracks over 85% of the sum up market capitalization of the companies listed on the Exchange. ? KSE-30 Index The Karachi Stock Exchange has launched the KSE-30 Index with base value of 10,000 files, formally implemented from Friday, September 1, 2006.The main feature of this index that makes it different from other indices is ? Based on the Free Float Methodology ? It includes only the top 30 most liquid companies listed on the KSE. ? KMI-30 ? Index introduced in September, 2008 ? Tracks the 30 most liquid Shariah-compliant companies listed at KSE weighted by free float adjusted market capitalization. ? Shariah Screening performed by Shariah Supervisory Board of Meezan Bank (chaired by jurist (Retd. ) Mufti Muhammad Taqi Usmani). ? KSE All Share Index ? It co nsists of all the companies listed on the KSE. ? KSE-GTOi fossil oil & Gas sphere plays vital roles in Pakistans economy and therefore KSE has developed a Tradable Oil & Gas Index which tracks at least 80% free-float market capitalization of the Oil & Gas Sector. This index provides Investors and Market Intermediaries with an appropriate benchmark that captures the performance of separately segment of the economy. KSE-100 Composition Basis The selection criteria for stock inclusion in the existing KSE-100 Index is found on three main filters, namely Sector rule, Capitalization rule and Default rule. The top sector companies may also qualify for inclusion on the basis of their market capitalization. Sector Rule Largest market capitalization in each Karachi Stock Exchange sectors excluding Open-end Mutual Fund Sector ? The Largest Capitalization Rule The remaining index places are taken up by the largest market capitalization companies in descending order. ? The Default Counter and Non Tradable Rule Company which is on the Defaulters Counter and/or its trading is suspended entertain Non-Tradable (i. e. NT) in preceding 6 months from the date of re-composition shall not be considered in the re-composition of KSE-100 Index . How many stocks are registered and categories? The total number of companies listed in KSE is 572 with a listed capital of RS. 1103072. 80 million ? In KSE companies are listed under following categories according to the nature of their industry. Sector Wise Categories of Companies Oil and Gas Pharma and Bio Tech Chemicals Media Forestry move & leisure Industrial metals and mining Fixed line Telecommunication General industries Electricity Electronic and electrical Goods Multiutilities Engineering Commercial Banks Industrial Transportation Non aliveness Insurance Support services Life insurance Automobile and Parts Real e severalise investment and services Beverages financial services Food Producers uprightness Investmen t Instruments Household Goods Software and computer services Leisure Goods. Technology Hardware and Equipment Personal Goods Personal Goods Tobacco Advance /Decline If there is increase trend in the prices of share then we said that the market gains the index or points and vice versa. Points Points shows the Overall worth of the market. There are many factors that specify the market points and due to these factors markets point increases or increases. These factors consist of formulae of capital structure and other related things. In Pakistan value of 1 point is approximately equal to 5 crores and it changes due to inflation and other economic factors. When an individual invest an amount equal to 5 Crores then 1 point increases and when he/she pull back his investment then 1 point decreases 1 point = 5 CroresStock ExchangeA stock market or equity market is a public (a loose network of economic transactions, not a physical facility or discrete) entity for the trading o f company stock (shares) and derivatives at an agreed price these are securities listed on a stock exchange as well as those only traded privately. The size of the world stock market was estimated at about $36. 6 trillion at the start of October 2008. The total world derivatives market has been estimated at about $791 trillion face or nominal value,2 11 times the size of the entire world economy.The stocks are listed and traded on stock exchanges which are entities of a corporation or usual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. The largest stock market in the United States, by market capitalization, is the New York Stock Exchange (NYSE). In Canada, the largest stock market is the Toronto Stock Exchange.Major European examples of stock exchanges include the Amsterdam Stock Exchange, London Stock Exchange, Paris Bourse, and the Deutsche Borse (Frankfurt Stock Exchange). In Africa, ex amples include Nigerian Stock Exchange, JSE Limited, etc. Asian examples include the Singapore Exchange, the Tokyo Stock Exchange, the Hong Kong Stock Exchange, the Shanghai Stock Exchange, and the Bombay Stock Exchange. In Latin America, there are such exchanges as the BM&F Bovespa and the BMV.A few decades ago, worldwide, buyers and sellers were individual investors, such as wealthy businessmen, usually with great family histories to particular corporations. Over time, markets have become more institutionalized buyers and sellers are largely institutions (e. g. , pension funds, insurance companies, mutual funds, index funds, exchange-traded funds, hedge funds, investor groups, banks and various other financial institutions). The rise of the institutional investor has brought with it some improvements in market operations.Thus, the government was responsible for fixed (and exorbitant) fees being markedly reduced for the small investor, but only laterward the large institutions h ad managed to break the brokers solid front on fees. (They then went to negotiated fees, but only for large institutions. History Established in 1875, the Bombay Stock Exchange is Asias first stock exchange. In 12th century France the courratiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks.Because these men also traded with debts, they could be called the first brokers. A uncouth misbelief is that in late 13th century Bruges commodity traders gathered inside the house of a man called vanguard der Beurze, and in 1309 they became the Brugse Beurse, institutionalizing what had been, until then, an informal meeting, but actually, the family Van der Beurze had a building in Antwerp where those gatherings occurred the Van der Beurze had Antwerp, as most of the merchants of that period, as their primary place for trading.The idea quickly spread around Flanders and neighboring counties and Beurzen concisely opened in Ghent and Amsterdam. In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351 the Venetian government outlawed spread rumors intended to lower the price of government funds. Bankers in Pisa, Verona, Genoa and Florence also began trading in government securities during the 14th century. This was only possible because these were independent city states not ruled by a duke but a council of influential citizens.Italian companies were also the first to issue shares. Companies in England and the Low Countries followed in the 16th century. The Dutch East India Company (founded in 1602) was the first joint-stock company to get a fixed capital stock and as a result, continuous trade in company stock emerged on the Amsterdam Exchange. Soon thereafter, a lively trade in various derivatives, among which options and repos, emerged on the Amsterdam market. Dutch traders also pioneered pathetic selling a practice which was banned by the Dutch authori ties as early as 1610. 7 There are now stock markets in virtually every developed and most developing economies, with the worlds biggest market being in the United States, United Kingdom, Japan, India, China, Canada, Germanys (Frankfurt Stock Exchange), France, South Korea and the Netherlands. Importance of stock market The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional financial capital for expansion by selling shares of ownership of the company in a public market.The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of commit in stocks, compared to other less liquid investments such as real estate. History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. An economy where the stock mar ket is on the rise is considered to be an up-and-coming economy.In fact, the stock market is often considered the primary indicator of a countrys economic strength and development. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison detre of central banks.Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction. The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the producti on of goods and services as well as employment. In this way the financial system contributes to increased prosperity. Stock market index The movements of the prices in a market or section of a market are captured in price indices called stock market indices, of which there are many, e. g. , the S&P, the FTSE and the Euronext indices. Such indices are usually market capitalization weighted, with the weights reflecting the contribution of the stock to the index. The constituents of the index are reviewed frequently to include/exclude stocks in order to reflect the changing business environment. Derivative instruments Financial innovation has brought many new financial instruments whose pay-offs or values depend on the prices of stocks. or so examples are exchange-traded funds (ETFs), stock index and stock options, equity swaps, single-stock futures, and stock index futures. These last two may be traded on futures exchanges (which are explicit from stock exchangestheir history traces back to commodities futures exchanges), or traded over-the-counter. As all of these products are only derived from stocks, they are sometimes considered to be traded in a (hypothetical) derivatives market, rather than the (hypothetical) stock market. Leveraged strategies Stock that a trader does not actually own may be traded using suddenly selling gross profit coast buying may be used to purchase stock with borrowed funds or, derivatives may be used to control large blocks of stocks for a much smaller amount of money than would be required by outright purchase or sales. Short selling In short selling, the trader borrows stock (usually from his brokerage which holds its clients shares or its own shares on account to lend to short sellers) then sells it on the market, hoping for the price to fall.The trader eventually buys back the stock, making money if the price fell in the retardation and losing money if it rose. Exiting a short position by buying back the stock is called co vering a short position. This strategy may also be used by unscrupulous traders in illiquid or thinly traded markets to artificially lower the price of a stock. Hence most markets either prevent short selling or place restrictions on when and how a short sale can occur. The practice of naked shorting is illegal in most (but not all) stock markets.Margin buying In margin buying, the trader borrows money (at interest) to buy a stock and hopes for it to rise. Most industrialized countries have regulations that require that if the borrowing is based on substantiating from other stocks the trader owns outright, it can be a maximum of a certain percentage of those other stocks value. In the United States, the margin requirements have been 50 %% for many years (that is, if you want to make a $1000 investment, you need to put up $500, and there is often a concern margin on a lower floor the $500).A margin call is made if the total value of the investors account cannot support the loss o f the trade. (Upon a decline in the value of the margined securities additional funds may be required to maintain the accounts equity, and with or without notice the margined security or any others within the account may be change by the brokerage to protect its loan position. The investor is responsible for any shortfall following such forced sales. ) Regulation of margin requirements (by the Federal Reserve) was implemented after the part of 1929.Before that, speculators typically only needed to put up as little as 10 percent (or even less) of the total investment delineated by the stocks purchased. Other rules may include the prohibition of free-riding putting in an order to buy stocks without paying initially (there is normally a three-day pity period for delivery of the stock), but then selling them (before the three-days are up) and using part of the proceeds to make the original payment (assuming that the value of the stocks has not declined in theIn margin buying, the tr ader borrows money (at interest) to buy a stock and hopes for it to rise. Most industrialized countries have regulations that require that if the borrowing is based on collateral from other stocks the trader owns outright, it can be a maximum of a certain percentage of those other stocks value. In the United States, the margin requirements have been 50 %% for many years (that is, if you want to make a $1000 investment, you need to put up $500, and there is often a maintenance margin below the $500).A margin call is made if the total value of the investors account cannot support the loss of the trade. (Upon a decline in the value of the margined securities additional funds may be required to maintain the accounts equity, and with or without notice the margined security or any others within the account may be sold by the brokerage to protect its loan position. The investor is responsible for any shortfall following such forced sales. ) Regulation of margin requirements (by the Federal Reserve) was implemented after the Crash of 1929.Before that, speculators typically only needed to put up as little as 10 percent (or even less) of the total investment represented by the stocks purchased. Other rules may include the prohibition of free-riding putting in an order to buy stocks without paying initially (there is normally a three-day grace period for delivery of the stock), but then selling them (before the three-days are up) and using part of the proceeds to make the original payment (assuming that the value of the stocks has not declined in theIn margin buying, the trader borrows money (at interest) to buy a stock and hopes for it to rise. Most industrialized countries have regulations that require that if the borrowing is based on collateral from other stocks the trader owns outright, it can be a maximum of a certain percentage of those other stocks value. In the United States, the margin requirements have been 50 %% for many years (that is, if you want to make a $1000 investment, you need to put up $500, and there is often a maintenance margin below the $500).A margin call is made if the total value of the investors account cannot support the loss of the trade. (Upon a decline in the value of the margined securities additional funds may be required to maintain the accounts equity, and with or without notice the margined security or any others within the account may be sold by the brokerage to protect its loan position. The investor is responsible for any shortfall following such forced sales. ) Regulation of margin requirements (by the Federal Reserve) was implemented after the Crash of 1929.Before that, speculators typically only needed to put up as little as 10 percent (or even less) of the total investment represented by the stocks purchased. Other rules may include the prohibition of free-riding putting in an order to buy stocks without paying initially (there is normally a three-day grace period for delivery of the stock), but then sel ling them (before the three-days are up) and using part of the proceeds to make the original payment (assuming that the value of the stocks has not declined in theNew issuance Global issuance of equity and equity-related instruments totaled $505 billion in 2004, a 29. 8 %% increase over the $389 billion raised in 2003. initial public offerings (IPOs) by US issuers increased 221 %% with 233 offerings that raised $45 billion, and IPOs in Europe, Middle East and Africa (EMEA) increased by 333 %%, from $ 9 billion to $39 billion. tax revenue According to much national or state legislation, a large array of fiscal obligations are taxed for capital gains.Taxes are charged by the state over the transactions, dividends and capital gains on the stock market, in particular in the stock exchanges. However, these fiscal obligations may vary from jurisdictions to jurisdictions because, among other reasons, it could be assumed that tax income is already incorporated into the stock price throug h the different taxes companies pay to the state, or that tax free stock market operations are useable to boost economic growth.