STOCK MARKETS

Trading Locations
• Organized Exchanges
– Listing Requirements
– Trading through members who have a seat on
the exchange
• OTC markets
– Minimum paid-up capital Rs. 10M
– Min. public Offering Rs. 5M or 25% of capital
 Trading Mechanisms
• Order Size
– Round Lot
– Odd Lot
• Time Limit
– Day Orders
– Open orders or GTC
– Fill or Kill orders
 Trading Mechanisms
• Type of orders
– Market Orders: Transact at the best available price
immediately. Uncertain price; certain execution
– Limit Orders: Limit for buy/sell specified by investor.
Certain price; uncertain execution
– Stop Orders: Also known as stop loss orders, where trade
takes place when the market reaches the designated price.
Uncertain price; certain execution
– Stop Limit Order: Specifies two prices. A Stop price and a
limit price. At Stop price, the order becomes limit order.
Uncertain execution at bounded price
– Market if Touch Order: Opposite of Stop order, like limit
order. Can be executed at, above or below the specified price
 Trading Mechanisms
• Short Sales
– Tick Test Rules
• Only when last trade is up tick
• Or no change in the last trade price
• Margin Accounts
– Initial Margin Requirement
– Maintenance Margin Requirement
Actual margin = Equity in investors margin
account
Total market value
 Transaction costs
• Implicit
– Impact cost
– Timing Cost
– Opportunity cost
• Explicit
– Commission
– Custodial
– Transfer Fee
Retail and Institutional investors

• Size of Order
• Commissions
• Method of Execution
 Block and Programme Trades
•Block Trades
-If more than 10% of shares being offloaded then
through Offer of Sale
•Programme Trades
-Upstairs market
 Stock Market Indicators/Indexes
• Price Weighted
• Market Capitalization Weighted (KSE
100 Index)
• Number of shares weighted
 Pricing Efficiency of stock
markets
• Weak Form: Price reflects the past prices
and historical data
• Semi strong form : Price reflects all
publicly available data
• Strong form: Price reflects all information,
public as well as insider info.
In a price efficient market active strategies do
not produce substantial returns
 KSE Listing Regulations
1. Minimum paid-up capital requirement for
listing on KSE is Rs. 250 million
2. Offering to the public should be minimum
of Rs. 250 M
3. AGM within 4 months of close of
financial year
4. Delisting if 50% fall in face value for 3
continuous years or if no dividend or
bonus declared for 5 years
 Continuous Funding System
• CFS MKT 2
• No financing by brokers
• Financial Institutions to provide funds
• Limit of CFS at Rs. 55bln
• Allowed for 22 working days
• Rollover allowed
 KATS Regulations
• Orders that cannot be immediately executed shall be
queued for future execution in a specific order of
priority mainly based in the following order:-
(i) Price
(ii) Time of entry
• Exchange will make available KATS to the Members
by providing trading workstation connections.
• Insertion of client’s code in every bid and offer
though KATS
• Circuit breakers
 KATS Regulations
Terms allowed for Time in Force Restriction
include:
• (i) Day
• (ii) Good Till Cancelled (GTC) (i.e. Open)
• (iii) Good to Date (Month-Day-Year) (GTD)
• (iv) Good for Week (GTW)
• (v) Good for Month (GTM)
• (vi) Fill or Kill (FOK)