THE LAHORE STOCK EXCHANGE
Progressive and forward-looking
Apr 02 - 08, 2007
(The writer, Dr. Shahid A. Zia is Head of Training, Human Resources, Investor Education & Research at the Lahore Stock Exchange. All queries related to LSE can be sent to firstname.lastname@example.org. 19-Khayaban e Aiwan e Iqbal, Lahor.)
Lahore Stock Exchange, established in October 1970, is a fast emerging market in the country. Currently, it is considered as second largest stock exchange with a market share of around 18-20% in terms of daily traded volumes, however, the way it is catching up on the back of enormous economic growth in the provincial capital the outlook of Lahore Stock Exchange giving a signal of gaining a position of tilting the balance in its favor. Currently, LSE has 519 companies, spanning 37 sectors of the economy, that are listed on the Exchange with total listed capital of Rs. 479.89 billion having market capitalization of Rs. 2.94 trillion as of date. We have 152 members of whom 95 are corporate and 57 are individual members.
Activities of Lahore Stock Exchange (LSE) have increased significantly in all operational areas since its inception. Over the years, LSE has successfully met various challenges and has now emerged, fully geared and positioned to aggressively compete with its fellow Exchanges, contributing towards the growth of Capital Markets in Pakistan.
An overview of the measures that have taken place at LSE over the past few years as part of its ongoing development plans and reforms portrays a number of significant initiatives taken to improve the regulatory regime and the trading environment for the benefit of Institutional Investors as well as listed companies.
Some of the initiatives mentioned below can be viewed at a glace:
* LSE was the first Exchange in the country to undertake automation of trading at the exchanges in 1994. LSE has made large investments in technology & automation to keep pace with globalization of securities trading. The Exchange is fully committed to providing a transparent, efficient, fair and investor friendly environment for the benefit of Investors and Issuers. The goal is to bring LSE up to international standards in operational, technical, regulatory and quality management areas and to ensure that not only domestic but also foreign investors are attracted.
* LSE has made direct investment in Pakistan Credit Rating Agency (Pvt) Ltd. (PACRA), Central Depository Company Ltd. (CDC), National Clearing Company of Pakistan Ltd. (NCCPL), and National Commodity Exchange Ltd. (NCEL), all of which play a central role in developing the infrastructure around the financial markets of Pakistan. In addition, LSE is an active member of the Federation of Euro-Asian Stock Exchanges (FEAS) and the South Asian Federation of Exchanges (SAFE), helping to expand its outreach, presence and profile beyond the boundaries of Pakistan.
* LSE was the first Exchange in Pakistan to offer Internet based trading to its members in the year 2001. It enables the brokers to reach out to the untapped retail markets. Currently, more than 50% of the total trading volume at the LSE originates from Internet trading terminals. The aim of this measure is to transform the LSE from a regional to a national player over a period of time.
* LSE has increased its geographical outreach by establishing its branches in other cities of the Province. Two such branch offices have become operational in Faisalabad and Sialkot. Similar Offices in other cities are also being contemplated. LSE's trading system has already been modified to connect branch offices in real-time fashion. There is a growing need for remote trading terminals reflecting the confidence of traders in the use of stable Internet Trading Systems.
* The quality of operations has been upgraded to the level modern international standards. This includes upgrading the IT infrastructure, regulations and procedures to incorporate existing and expected technological changes, as well as reorganizing and restructuring the workforce. As a result, LSEís capabilities as both a front-line regulatory body and a service organization have been significantly enhanced.
* LSE has successfully launched Unique Identification Number (UIN) System with an objective to bring more efficiency and transparency to the stock business and to improve the surveillance and monitoring capacity of the Exchange.
* LSE has implemented a regular timetable for the Broker System Audit, in order to build investors' confidence. Also, LSE has taken effective risk and exposure management measures including the implementation of a fully automated in-house developed Trade Risk Filter (TRF) to efficiently monitor members' pre-trading exposures on a real time basis. This has been a quantum leap for us in improving our risk management systems.
* A visible trend at the LSE has been the increasing number of corporate members. It is heartening to note that part of this increase has been due to the entry of investment banks/financial institutions (or their subsidiaries) as members of the Exchange. An overview of this trend over the past years is as follows:
LSE’s MEMBERSHIP STRUCTURE:
Banks or their Subsidiaries Individual Members Total .
Private Limited Companies.
Public Limited Companies
The above trend has led to record trading volumes as well as an improved product offering. The measures at LSE have attempted to create an atmosphere, which is more conducive and transparent for investment. The investing public has received the reforms very positively. It can be quantitatively substantiated with the following key indicators:
KEY INDICATORS OF LSE:
Volume (# of Shares in million)
Volume (Rs. in million)
Average Daily Volume (# of shares in million)
Average Daily Volume (Rs. in million)
Number of Trades (in million)
Average Number of Daily Trades
LSE -25 Index (December 31st )
Market Capitalization (Rs. in million as on December 31st)
* LSE Training Institute specifically dedicated to the Capital Markets, is the first of its kind in Pakistan and was established in 2006. Formal courses have been introduced to provide trained human resources for the capital markets. It has also launched a series of Education Programs with a view to educate the brokers, agents and general public about the securities market and its laws. In an effort to promote the education sector, particularly in relation to financial markets, LSE is providing scholarships to deserving students of Lahore University of Management Sciences (LUMS).
* In another trend-setting example, Lahore Stock Exchange and Islamabad Stock Exchange have joined hands to establish a Unified Trading Platform which will help to bring increased liquidity in the market, improve price discovery, maximize transparency, increase turnover, broaden investor base, curtail risks and distortions in trade, provide cost effective service to the investing public and enhance the image of both the Exchanges.
* As part of second generation capital market reforms being pursued by the Securities & Exchange Commission of Pakistan, demutualization is being seriously considered by the members of the exchanges and we hope that during the year 2007 a decision will be taken in the best interest of the capital markets of the country. Demutualization is in line with international standards, which will ensure that the exchange truly and fairly represents the interests of all stakeholders.
The initiatives / projects that have been highlighted above hopefully will provide further confidence to the investors regarding the trading environment at the LSE which invites to trade at the Lahore Stock Exchange (LSE) with a sense of confidence and achievement.
Mr. Hamesh Khan (T.I.)
Lahore Stock Exchange
Mr. Hamid M. Imtiazi
Lahore Stock Exchange