The Securities and Exchange Commission of Pakistan (SECP) was set up in pursuance of the Securities and Exchange Commission of Pakistan Act, 1997. The SECP was initially responsible for the regulation of the corporate sector and capital market.
Over time, its mandate has expanded to include supervision and regulation of insurance companies, non-banking finance companies and private pensions. The SECP has also been entrusted with oversight of various external service providers to the corporate and financial sectors, including chartered accountants, credit rating agencies, corporate secretaries, brokers, surveyors etc. For more information, please visit www.secp.gov.pk
As a part of the Capital Market Development Program of the Asian Development Bank (ADB) in Pakistan, the Capital Market Project Consultants, Arthur Anderson & Company were given the mandate to develop recommendations for a National Clearing & Settlement System (NCSS) to replace the separate and individual Clearing Houses of three Stock Exchanges, namely Karachi Stock Exchange, Lahore Stock Exchange and Islamabad Stock Exchange by a single and centralized entity.
The Company was incorporated on July 3, 2001 to manage and operate the National Clearing & Settlement System (NCSS) in a fully automated electronic settlement system. NCSS Live Operations commenced on December 24, 2001. However, the Company became fully operational in the year 2003-04 by inducting and handling the clearing and settlement of all book-entry securities through NCSS. Thereafter, any security that becomes live in the Central Depository System, on ready status, is accordingly inducted into the NCSS.
The Capital Market of Pakistan has a triangular foundation comprising of the stock exchange, Depository Company and NCCPL; the goal of all being an economically stronger, more prosperous Pakistani Capital Market. Armed with this vision, NCCPL is playing a significant role in ensuring growth and prosperity to the Capital Market of Pakistan. For more information, please visit www.nccpl.com.pk
A brokerage firm is a financial institution that facilitates the buying and selling of securities, such as stocks, bonds, and mutual funds, on behalf of clients. These firms typically provide a platform for investors to execute trades and may offer additional services like investment advice, research, and portfolio management. Brokerage firms earn commissions or fees for their services.
Shares are the most commonly traded securities on the stock exchanges. A share represents ownership in the company and hence is referred to as an ‘equity instrument’. The amount of ownership is restricted to the extent of shares purchased.
Bonds on the other hand represent the amount of funds ‘lent’ out to the company. Hence, it is referred to as a ‘debt instrument’ and entitles the holder a fixed rate of interest.
A listed company is one whose securities are listed on an exchange. The share price of a listed company is quoted and traded on a stock exchange. An unlisted company is one whose securities are not listed on an exchange. Its shares are therefore not available for trading to the general public. Private limited companies are examples of unlisted companies.
Pakistan Stock Exchange was established on September 18, 1947 and was formally incorporated on March 10, 1949 under the name of ‘Karachi Stock Exchange’, as a Company limited by Guarantee. In October 1970, a second stock exchange was established in Lahore to meet the stock trading needs of the provincial metropolis.
In October 1989, the Islamabad Stock Exchange was established to cater to the investors of the northern parts of the country. Because the three exchanges had separate management, trading interfaces, indices, and had no mutualized structure, therefore the Stock Exchanges (Corporatization, Demutualization and Integration) Act, 2012 was promulgated by the Government of Pakistan which ultimately resulted in the three exchanges integrating their operations effective January 11, 2016 under the new name ‘Pakistan Stock Exchange Limited’ (PSX). For more information, please visit www.psx.com.pk
The Central Depository Company has evolved as the infrastructure backbone and the Ultimate Custodian of the Pakistan Capital Market. Established as a securities depository, CDC is the sole entity handling the electronic (paperless) settlement of transactions carried out at the Pakistan Stock Exchange.
Through the efficient functioning of the CDC, all the market settlement is in book entry form. As per the Companies Act, 2017, CDC holds the status of a Public Interest Company and Large Sized Company since it holds assets of the general public in a fiduciary capacity. For more information, please visit www.cdcpakistan.com
Stock exchange is an integral part of a country’s capital market as it aids in capital formation through the sale of securities most notably shares. It also provides the marketability of securities by providing a secondary market for trading. Hence, it’s a place where securities of listed companies can be bought and sold thereby bringing together companies and investors in one place.
A primary market is a market where securities that have never been issued before being offered to the public. This initial public offering (IPO), also called the primary issue and is therefore a transaction between the issuing company and the investor.
A buyer of the initial issue may consider selling the security to another party. This transaction is done on the secondary market where the outstanding securities are traded amongst investors.