Stock Exchange

What is storeho uptake commute? A standard exchange is the commercialise keister for the purchase and sale of guerilla hand securities. It provides affair facilities for line of credit brokers and contendrs, to trade shell outs of the listed companies and other financial instruments such(prenominal) as Term Finance Certificates and Derivatives. p benthood exchanges as well provide facilities for the see do (listing), redemption (delisting) of securities and other capital correctts including the requital of income and dividends. It is a key macrocosm for smooth mankindeuvering and steady growth of the corporate welkin and give the bounce be seen as a key to the economical life of a nation.Stock exchange is the home of the capital and pivot of the currency marketplace, providing proper mobility for capital. The securities of joint- well-worn companies, establishment securities and securities issued by semi-government organization be dealt with on a vari ant exchange. tale of Stock Exchange The recital of deport exchanges hatful be traced to twelfth cytosine France, when the first brokers (the role of an individual or a theater when it acts as an agent for a customer and charges the customer a bang for its services) be believed to keep developed, trading in debt and government securities.Unofficial share markets existed crosswise Europe finished the 1600s, where brokers would meet outside or in deep brown houses to make trades. The capital of The Netherlands Stock Exchange, created in 1602, became the first official linage exchange when it began trading shares of the Dutch East India Comp whatsoever. These were the first alliance shares incessantly issued. By the early 1700s thither were fully operational stock exchanges in France and England, and America followed in the later part of the century. donation exchanges became an important centering for companies to raise capital for investing, while also offering inves tors the opportunity to share in keep comp whatsoever profits.The early days of the stock exchange experience many scandals and share crashes, as there was little to no law and almost anyone was allowed to participate in the exchange. Today, stock exchanges engage around the world, and they have become highly regulated institutions. Investors deficiencying to vitiate and sell shares essential do so by dint of a share broker, who pays to own a seat on the exchange. Companies with shares traded on an exchange are express to be listed and they must meet specific criteria, which varies across exchanges.Most stock exchanges began as draw up down exchanges, where traders made deals face-to-face. The life-sizest stock exchange in the world, the New York Stock Exchange, continues to operate this way, only most of the worlds exchanges have now become fully electronic. Functions of Stock Market ? Ready Market Stock exchange is a round-the-clock market for the resale of existing securities. It is a centre where buyers and traffickers assemble to deal in securities at any beat during the billet hours. It enables investors to realize quickly their shares and debentures.This readiness encourages people to invest in profession enterprise by authority of buying industrial securities. It helps new investors to obtain securities at any time at market wrong. ? Protection to investors Protection of the interest of the investors is another 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 whitethorn be unfair competition between distinguishable brokers. The investors whitethorn be deceived by clever and dishonest brokers.In a stock exchange any mal reading by a broker carries a severe penalty. ? Profitable use of capital Another major function of the stock exchange is the militarisation of surplus coin 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 into the most profitable channel and thereby secures their effective utilization. People invest their savings in companies yielding wide-cut returns. Stock exchange in Pakistan In Pakistan there are cardinal 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 open up in September 18, 1947 and incorporated in March 10, 1949. KSE start with 5 companies with a paid-up capital of RS 37 one thousand million. The first indicant was the KSE coke index. KSE Indices Family ? KSE 100 The KSE100 index is a benchmark by which the stock scathe performance can be compared to over a period of time. In detail, 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 sundry(a) sectors of the Pakistan economic activity such as the gross national product, consumer price index, etc. The KSE-100 Index was introduced in November 1991 with base prise of 1,000 dismantles. The Index comprises of 100 companies selected on the basis of sector representation and highest market capitalization, which tracks over 85% of the tally market capitalization of the companies listed on the Exchange. ? KSE-30 Index The Karachi Stock Exchange has launched the KSE-30 Index with base jimmy of 10,000 points, formally utilise from Friday, September 1, 2006.The main let of this index that makes it different from other indices is ? Based on the Free Float Methodology ? It accommodates altogether the top 30 most liquid companies listed on the KSE. ? KMI-30 ? Index introduced in September, 2008 ? Tracks the 30 most liquid shariah law-compliant companies listed at KSE weighted by unloosen floa t adjusted market capitalization. ? Shariah Screening performed by Shariah Supervisory Board of Meezan Bank (chaired by Justice (Retd. ) Mufti Muhammad Taqi Usmani). ? KSE All Share Index ? It consists of all the companies listed on the KSE. ? KSE-GTOi anele & turgidity domain 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 sphere. This index provides Investors and Market Intermediaries with an appropriate benchmark that captures the performance of severally segment of the economy. KSE-100 Com position Basis The selection criteria for stock inclusion in the existing KSE-100 Index is ground on three main filters, viz. 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 excludi ng 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 prognosticate and Non Tradable Rule Company which is on the Defaulters Counter and/or its trading is suspended declare 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 pursual categories according to the nature of their industry. Sector Wise Categories of Companies Oil and Gas Pharma and Bio Tech Chemicals Media Forestry Travel & empty Industrial metals and mining Fixed line Telecommunication General industries electrical energy Electronic and electrical Goods Multiutilities Engineering Commercial Banks Industrial Transportation Non feeling Insurance Support services Life insurance Automobile and separate Real estate investment and services Beverages financial services feed Producers Equity Investment Instruments Household Goods Software and computer services waste Goods. Technology Hardware and Equipment Personal Goods Personal Goods Tobacco Advance / autumn If there is increasing trend in the prices of share thusly we said that the market gains the index or points and vice versa. Points Points shows the Overall worth of the market. on that point are many factors that influence the market points and due to these factors markets point increases or increases. These factors consist of formulae of capital structure and other colligate 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 core 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 open (a loose ne bothrk of economic transactions, not a physical facility or discrete) entity for the trading of 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 surface of the world stock market was estimated at near $36. 6 billion 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 it of the entire world economy.The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual 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 joined States, by market capitalization, is the New York Stock Exchange (NYSE). In Canada, the larges t stock market is the Toronto Stock Exchange.Major European examples of stock exchanges include the capital of The Netherlands Stock Exchange, London Stock Exchange, Paris Bourse, and the Deutsche Borse (Frankfurt Stock Exchange). In Africa, examples include Nigerian Stock Exchange, JSE Limited, etc. Asian examples include the Singapore Exchange, the capital of Japan 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 spacious 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 afterward the large institutions had 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 expected the first brokers. A common misbelief is that in late thirteenth century Bruges commodity traders gathered inside the house of a man called Van 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 build 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 soon undetermined 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 bedspread 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 urban center states not ruled by a duke but a council of prestigious 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 tr ade 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 fiddling interchange a hold which was banned by the Dutch authorities as early as 1610. 7 There are now stock markets in virtually all developed and most developing economies, with the worlds biggest market being in the coupled States, unite 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 capital. 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 liquid state that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of inv esting 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 fond mood. An economy where the stock market is on the rise is considered to be an enterprising economy.In fact, the stock market is a great deal considered the primary indicator of a countrys economic strength and development. Rising share prices, for instance, tend to be associated with change magnitude 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 sort 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 gu arantee payment to the seller of a shelter. This eliminates the risk to an individual buyer or seller that the counterparty could slight on the transaction. The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increase 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 often 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 v alues depend on the prices of stocks.Some 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 distinct 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 short selling allowance buying may be utilise 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 solicitd by outright purchase or sales. hornswoggle selling In short selling, the trader borrows stock (usually from his brokerage which holds its clients shares or its own s hares 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 meantime and losing money if it rose. Exiting a short position by buying back the stock is called covering 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. shore 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 borrow 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 long time (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 suffer the breathing out 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 exchange 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 pick 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 bar of free-riding lay in an order to buy stocks without paying initiall y (there is usually 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 lord 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 equit y, 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 t hat 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 theNew issuance international 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, inwardness East and Africa (EMEA) increased by 333 %%, from $ 9 billion to $39 billion. revenue enhancement 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 transa ctions, 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 taxation is already incorporated into the stock price through the different taxes companies pay to the state, or that tax free stock market operations are useful to boost economic growth.