INDUCTION OF TECHNOLOGY AT KSE

The DOT would bring trading to the doorstep of every existing and prospective investor to help broaden the market base

By SYED M. ASLAM
Oct 20 - 26, 2003

The launching ceremony of DOT, Display Only Terminal, was held at Karachi Stock Exchange (KSE) on the 9th of this month. The product developed by one of the leading ISP, Cyber.Net in collaboration with the KSE will initially enable 70,000 local investors to view Karachi Automated Trading System (KATS) real-time from anywhere in the country.

The first version of the product will also be available simultaneously in three other cities of the country, namely, Lahore, Islamabad and Peshawar. The second version of the service, expected to be released in the first quarter next year, would have enhanced features like analytical information and market tips etc. while the third version would include PDA and Mobile applications for the convenience of Non Resident Pakistanis as well as foreign investors.

The Country General Manager of Cyber.Net M. Javed Wadood informed the participants of the ceremony that the DOT would bring trading to the doorstep of every existing and prospective investor to help broaden the market base. "One of the salient features of DOT include the market watch which displays the current best market, last trading price, direction, total volume, average, high, low and net change of any scrip. It would also help the investors to monitor profit and loss by determining the difference in traded positions in the latest trade as well as offer them an inquiry option through the Exchange statistics or through the Market by order. Another salient feature of DOT is the 'agent alert' through symbols while another is that it will allow the personalisation and profiling."

The induction of DOT is the latest in the induction of information technology since the automation at the KSE begun six years ago. It is also necessitated by sharp rise in trading volumes, market capitalisation and growing inquiries that the biggest bourse of the country has witnessed in last half a decade. For instance, according to the figures presented by the Managing Director of the KSE, Moin M. Fudda at the launching ceremony, the volume of market capitalisation has increased from Rs 268 billion in 1998 to Rs 382 billion in 2000 to Rs 904 billion this year (a history was made on Tuesday September 2 this year when market capitalisation crossed the Rs 1 trillion mark for the first time ever closing at Rs 1.007 trillion). Similarly, there has been a sharp rise in the average daily turnovers during the same period from 77 million shares in 1998 to 187 million shares in 2000 and 340 million shares this year. (On Thursday August 7 the trading volume at the KSE touched record high of 958.519 million shares superceding the previous high of 698 million shares on December 31 last year. The very next day, on Friday August 8, the trading volume increased further to 960.788 million shares).

The average daily hits on the KSE's website, www.kse.net.pk formerly www.kse.com.pk, has also increased more than three-fold from 940,000 last November to around 3 million today. The tremendous increase in average daily hits on the KSE website, which started with 128 kbps, made it imperative for it to enhance its bandwidth to 2 mb last year which remain completely utilised at present.

While the KSE has come a long way since the open-out-cry system was replaced by automated trading system in 1997 and the induction of technology thereafter it faces many technological challenges ahead due primarily to interest which seems to be increasing by each passing day. True that the market has shed hundreds of points and billions in capitalisation in quick succession during the last few weeks but still enjoys the reputation of 'the best performing market in the world'.

Much has changed at the KSE in the recent past. Today all transactions at the KSE are fully automated, the T+3 settlement system is in force, the COT period has been extended to 10 working days, the risk management system allows real-time exposure monitoring as well as hourly capital adequacy, live quotes are available on the cellular phones and lately the induction of the DOT.

However, much also remains to be done to face the technological changes ahead. The KSE keeps attracting the interest of the investors, both local and foreign, and the robust activities necessitates the need of the continuation of the technology revolution which started at the bourse six years ago.

The Chairman of Securities and Exchange Commission of Pakistan, Dr Tariq Hassan, who was present at the launching ceremony of the DOT stressed on the need of going 'global about technical innovation' adding that 'the KSE may be the best performing market but we have to ensure that the activities are not only sustainable but will also keep on growing. It is encouraging that the multitudes of retail investors are coming to help broaden and deepen the market. With the National Savings Scheme gone there are lots of such small investors for which the DOT could be a very good product."

That poses technological challenges for the KSE in the near future to introduce value-added technological products to facilitate Odd Lots trading on the KATS for the convenience of retail investors. Other challenges include the upgradation of the hardware, on-line pre-trade verification of exposures and verification of capital adequacy. Development of over-the-counter-market, introduction of new trade instruments like index, features and options and on-line access to Internet trading are some of the other such technological challenges.