Capital Market Presentation - Invest Wisely

Report
Securities and Exchange
Commission of Pakistan
Securities and Exchange Commission of Pakistan
1
Contents


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Introduction to the Capital Market:

Regulated Entities & Market Infrastructure Institutions

Steps for Investors and Requirements for Brokers

Order Flow
Major Market Reforms

Stock Market

Commodity Futures Market

Debt Market
Future Plans
Securities and Exchange Commission of Pakistan
2
The Capital Market – An Introduction
A capital market is a market for securities (debt or equity), where
business enterprises (companies) and governments can raise longterm funds. It is defined as a market in which money is provided for
periods longer than a year.
(1) Primary Market
The market for new shares of securities. A primary market is one in which
a company issues new securities in exchange for cash from an investor
(buyer).
(2) Secondary Market
Once new securities have been sold in the primary market, an efficient
manner must exist for their resale. Secondary markets give investors the
means to resell/ trade existing securities.
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Securities and Exchange Commission of Pakistan
The Capital Market – An Introduction
Capital Market Instruments
(a) Equities
• Common stock/Ordinary shares
• Preferred stock
(b) Fixed Income
• Corporate bonds/TFCs
(c) Derivatives Market
• Stock & Index Futures
• Stock and Index Options
(d) Exchange Traded Funds
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Securities and Exchange Commission of Pakistan
The Capital Market – An Introduction
Entities Regulated by SECP
•
•
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•
•
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Stock Exchanges
Commodity Exchange
Depository Company
Clearing Company
Brokers and Agents
Underwriters
Balloters
Credit Rating Companies
Consultant to the Issue
Share registrars
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Securities and Exchange Commission of Pakistan
The Capital Market Institutions
Karachi Stock Exchange (G) Ltd established in 1947
Lahore Stock Exchange (G) Ltd established in 1970
Islamabad Stock Exchange (G) Ltd established in1989
Central Depository Company of Pakistan Limited
established in 1997
National Clearing Company of Pakistan Limited
established in 2001
Pakistan Mercantile Exchange Ltd. (formerly NCEL)
established in 2002 and operations started in 2007
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Securities and Exchange Commission of Pakistan
The Capital Market Intermediaries
Members (stock & commodity)
Stock Brokers & Commodity Brokers
Clearing/Settling Banks
Agents
NCCPL Clearing Members (Brokers and Non
Brokers)
CDS Participants
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Securities and Exchange Commission of Pakistan
Systems and Processes
Pre-Trade
Risk
Management
Depository
Clearing and
Settlement
Trading
Post Trade
Risk
Management
8
Securities and Exchange Commission of Pakistan
Market Entry by Investors
Stock
Market
Broker
Investor
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Securities and Exchange Commission of Pakistan
Steps for an Investor
Agreement with Broker/Opening of Account with Broker
Allotment of Account Number & Trading Code
Opening of Account in CDS
Mapping of UIN
Deposit of Margins
Making an Order
10
Securities and Exchange Commission of Pakistan
Requirements for Brokers
Member of an Exchange
Participant in CDC
Clearing Member in NCCPL
Registered with SECP as Broker
Trading Terminal
Margin and Exposures
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Securities and Exchange Commission of Pakistan
Karachi Stock Exchange
 Governance Structure – Board & Committees, Regulations
of Constitution of the Board, General Regulations &
Articles.
 Member
Conduct Regulations – General, Proprietary
Trading, Risk Management, Market Making, Default
Management, Branch Office, System Audit, Short Selling
etc.
 Market
Conduct Regulations – Separate Regulations for
each market segment: Deliverable, Cash-Settled, Index
Futures, Index Options, ETFs, BATS, etc.
 Issuers – Listing Regulations
 Investors – address complaints/dispute resolution
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Securities and Exchange Commission of Pakistan
KSE Progress
Number of Listed
Companies
Total Listed Capital Rs. Bln
Total Market
Capitalization - Rs. Bln
KSE-100 Index
2006
2007
2008
2009
2010
2011
2012
652
654
653
651
644
638
591
519
671
750
814
919
1,048
1,058
2,771
4,330
1,859
2,706
3,268
2,945
3,572
10,041
14,076
5,865
9,387
12,022
11,347
13,928
*Figures for 2012 taken as of April 19, 2012.
**All other figures have been taken as of December 31st of each year
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Securities and Exchange Commission of Pakistan
Karachi Stock Exchange
MARKET SEGMENTS
Equity
Derivatives
Bonds
OTC
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Securities and Exchange Commission of Pakistan
Karachi Stock Exchange
Order Work Flow
Risk
Management
System
Trading
Engine
Reporting
Engine
Transmission
of Data to
NCCPL
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Securities and Exchange Commission of Pakistan
National Clearing Company of Pakistan
Ltd.
Order Work Flow
Trading data
from Stock
Exchanges
Preparation
of Balance
Order
Auto Pay and
Collect
System
Automated
Securities
Settlement
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Securities and Exchange Commission of Pakistan
Central Depository Company of Pakistan
Ltd.
Automated Securities Settlement
Corporate Actions
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Securities and Exchange Commission of Pakistan
MAJOR MARKET REFORMS
Securities and Exchange Commission of Pakistan
REFORM PROCESS to achieve market integrity - a fair, transparent,
and efficient market that engenders investor confidence
Transparency Measures
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Abolished disclosed trading to curb
front running
“Blank sales" replaced by regulated
“short selling”
Standardized Account Opening
Form for brokerage houses and a
standardized sub-account opening
form
for
CDC
have
been
introduced
In-house Badla which was a nontransparent method of financing
has been abolished
Introduction
of
Unique
Identification Number (UIN)
Internet Trading Regulations
Policy
for
dealing
with
defunct/defaulter companies
Governance Issues
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Independent Chairman
and re
composition of board
Fit & proper criteria for directors
Brokers of stock exchanges cannot
sit on board of listed companies
Revamped System Audit
Code of Corporate Governance
Segregation of Client’s Assets from
Broker’s Assets;
Mandatory reporting of Off –
Market Transactions
Mandatory
use
of
banking
channels above Rs. 25,000
Introduction of joint procedures to
be
followed
in
case
of
expulsion/suspension
Restriction on brokers trading
through other brokers of the same
exchange
Securities and Exchange Commission of Pakistan
REFORM PROCESS
..continued
Risk Management
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VAR based Margining Regime
Position Limits Across Markets
Valuation of Securities deposited
as Collateral
Mark-to Market loss collection
Client-Level Netting Regime
Concentration
and
liquidity
margins
1st day circuit breakers (50% or Rs.
5 whichever is higher)
Introduction of uniform eligibility
criteria for Deliverable Futures,
Cash Settled Futures and Margin
Trading Market.
IDS & FIRMS
Other Measures
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Development of OTC market
Introduction of Cash Settled
Futures
and index Future
Contracts
Introduction of T+2;
Development of free float index
Introduction of Islamic Index
Increase in IPF contribution limit
Automation
of
Securities
Settlement project
BATS
Regulatory framework for margin
financing,
margin
trading,
securities lending and borrowing
and pledging of clients’ securities
AML/CFT Regime
Introduction of ETFs
Introduction of Index Options
Securities and Exchange Commission of Pakistan
Commodities Market Reforms
 Mandatory registration of all PMEX members as brokers.
 New commodities futures contract introduced at PMEX
including, cotton, wheat, sugar, varying sizes of gold, silver
and crude oil etc.
 Introduction
of Regulations for implementing the concept of
Market Makers.
 Fit and Proper Criteria for Directors on the Board of PMEX.
 Maintenance of minimum net worth requirements and
introduction of capital adequacy requirements similar to those
of the stock exchanges.
 Universal and Specific Memberships.
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Securities and Exchange Commission of Pakistan
Debt Market Reforms
 Bonds
Automated Trading System introduced at Exchanges’
platform in line with international standards and Bloomberg based
E-bond system
 Implemented
various recommendations made by the BATS
Review Committee for revamping the regulatory and operational
framework for trading of debt securities in line with international
best practices
 Centralized reporting of all unlisted TFCs at NCCPL
 The rate of stamp duty on the issuance of corporate bonds and
transfer of assets in case of securitization was reduced
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Securities and Exchange Commission of Pakistan
Future Plans
 Corporatization and Demutualization of the stock exchanges
 Robust Regulatory Framework in line with International Best
Practices and International Organization of Securities Regulators
(IOSCO) Principles for the Capital Market (SECP Act, Futures
Trading Act and Securities Act)
 Segregation of Roles of the SECP and the Frontline Regulators
 Transfer of Risk Management from the Stock Exchanges to
NCCPL
 Enable NCCPL to Function as a Central Counter Party (CCP)
and Establish CCP Settlement Guarantee Fund
 Formulate regulations for the Issuance of Sukuk Certificates
 Develop regulations for the Issuance of Call Warrants
Securities and Exchange Commission of Pakistan
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Future Plans
 Hold Road Shows, Awareness Campaigns/ Educational Seminars and
Publish Reading Material and Employ Specialized Institutions to Carry
out Knowledge Building Activities
 Measures to develop retail demand through enhanced outreach
 Measures to Increase Depository Outreach
 Develop code of conduct for arbitrators
 Implementation of revised Broker Regime: incorporating improved
Capital Adequacy Requirements, Code of Conduct and Fit & Proper
Criteria for brokers, Entry Requirements for members of stock
exchanges, appointment of Compliance Officers and Risk Managers by
brokers and linking of trading activities with financial strength of brokers
 Segregation of Trading, Clearing and Custodial Functions of Market
Intermediaries
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Securities and Exchange Commission of Pakistan
Future Plans
 Implementation of index based market halts
 Implement effective KYC and CDD policies and procedures
 Introduction of e-dividend and e-voting mechanisms
 Introduction of SPAN (Standardized Portfolio Analysis of Risk) Margining
System
 Develop regulatory framework for inter-exchange trades
 Cross listing of Indices
 Introduction of large cap and small cap listing boards so as to
encourage listing of small capital based companies and study
establishment of SME Board/ Exchange
 Work towards shifting to 100% demat for IPOs
 Development of electronic/online IPO application
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Securities and Exchange Commission of Pakistan
Future Plans
 Measures for Debt Market Development
 Regulatory changes for listing of debt securities of
unlisted companies
 Rationalize documents for listing of TFCs / debt
market securities
 Revamping of credit rating regulatory framework
 Listing of Government debt
 Measures for Development of Secondary Trading in the
Debt Market:
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Improve effectiveness of bond trading platforms
introduction of warrants
cross listing of TFCs
establishment of Bond Pricing Agency
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Securities and Exchange Commission of Pakistan
Future Plans
 Establishment of a Shariah Board
 Shariah-compliant
investment
alternatives,
consolidation of existing Islamic institutions and
development of innovative Shariah compliant
institutions, products and services
 Focus on creating a viable market for the effective
mobilization of Islamic funds
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Securities and Exchange Commission of Pakistan
Thank you.
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Securities and Exchange Commission of Pakistan

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