1. BROKRAGE FIRMS.

2. What is Brokers?
• An individual or firm which acts as
an intermediary between a buyer
and seller, usually charging a commission.
For securities and most
other products, a license is required.
• Broker means any person engaged in the business
of effecting transactions in securities for the
account of others.

3. CONT…
• Capital market is a place where brokers deal in
long term debt and equity capital in the form
of debenture and shares.

4. Procedure for Trading in ISE
Step 3
• Delivery
Step 2 • Clearing & Settlement
• Placing Orders
Step 1 • Commission/Brokerage Fee
• Selecting Stock Broker
• Opening Account with Stock-Broker

5. Word of Advice
1. Understand the nature of Stock Investment before
making any investment decision.
2. Always Invest Through a Registered Broker of the
exchange.
3. Diversify your investment to a possible extent.
4. Keep Complete record of your Investments.
5. Maintain your own CDC account for the safe custody of
your shares.
6. The key to making money in stocks is not to get scared
out of them.

6. Custodial Functions
• Central Depository Company of Pakistan Limited (CDC) provides
custodial services for shares.
• It ensures efficient handling and transfer of shares.
• Types of CDC Accounts:
– Main Account for Brokers ( a gateway account)
– House Account (a family account of the Broker)
– Sub-Account (An investor account with CDC
through Broker)
• Investor Account Services. (Facilitating the Investors to open their
independent CDC Accounts)
• Initial Account Opening Fee: Rs.500/-.
• Annual renewal Fee Rs.500/-.

7. Trading—The Role of Brokers
• What brokers do…
– An investor will open an account with a broker and place trades via
telephone or online
– Local broker will forward order to floor broker on trading floor of
exchange
– Floor broker trades on the floor of the exchange
• Each stock is traded in a particular spot on the exchange floor
using an auction-like process
– Trading is supervised by a specialist
» Specialists make markets in designated securities
– Confirmation of trade is forwarded to local broker and investor

8. Schematic Representation of a Stock Market Transaction

9. Current Stock Trading Position
Today
• 724 companies are listed, where as active trading is
carried out on 330 companies
• Listed Capital is US $ 4,646 Million or Pak Rs 278,760
Million
• Market Capitalization is US $ 7,746 Million or Pak Rs
464,760 Million
• Average Daily Turnover of 142 Million Shares and US $
78 Million or Pak Rs 4,680 Million
• Membership strength is 200 but 133 as active brokers

10. Karachi Stock Exchange
• Out of 133 only 8 brokers are offering online
services
• Why only 8 Brokers?
– Setup cost is too high
– Need to deploy high security system
– Exact Requirements not disclosed for General
Public

11. Online Trading in Pakistan
• Not really online as it is partial online
Following steps are involved on Broker end:
• Maintain Direct connection with iKATS (Internet Karachi Automated
Transaction System)
– Backbone software of Karachi Stock Exchange controlled by SECP
(Securities & Exchange Commission of Pakistan)
• Maintain link account with Central Depository Company, controlled by
SECP (Securities & Exchange Commission of Pakistan) to control online
transfer of shares

12. CONT…
• Transparent account Maintenance of clients
• Maintain manual cash handling system
• Secure interface to the clients
• Efficient Support System
Steps required on Client End:
• As cash involvement is handled off line, so
bank account is normally used
• Send money from bank account with account
opening form to the chosen broker

13. • Broker on receiving money will verify the
details and open account with him
• Get to know the online interface. Normally
three types of interfaces working in Pakistan
– Online Website
– Software which connects to the web server on it’s
own
– Through Short Messaging Service over Mobile
Phone

14. Online Stock Trading Model
iKATS
Online
Customer Broker Stock
(trader)
customer’s
Exchange
account
CDC