Karachi Stock Exchange
Abstract
This report will introduce the Karachi Stock Exchange (KSE) to readers with the assumption that they have no prior knowledge regarding the entity. The report begins with an introduction to stock exchanges in general and the KSE in particular. This is followed by an examination of the particulars of the operations of the entity. These include items such as membership criteria, and the trading and settlement system in place. The report concludes with an analysis of recent trends as well as changes to be implemented in the future.
Introduction
Stock exchanges are basically a type of organized market which facilitate the buying and selling of financial instruments known as securities. The most commonly traded instrument is shares of companies listed on the exchange although bonds, options and futures contracts are also traded. Stock exchanges serve a myriad of purposes. First and foremost the stock exchange plays an important role in the running of the capital market of the country. This means that stock exchanges contribute towards the efficient allocation of resources in the economy. As an indicator of the performance of an economy and of individual companies, stock exchanges aid resource allocation by diverting resources to companies that perform well. Similarly, poorly performing companies face the prospect of losing out when it comes to the allocation of resources. This works indirectly; poor performance in the secondary market will adversely impact performance in the primary market, especially in the case of seasoned IPOs. This brings us to another important and more obvious function of stock exchanges. In the primary market, companies can raise capital by issuing shares to the public. A share represents an ...