the role of institutional investors in expanding the market institutional investors roundtable...
TRANSCRIPT
The Role of Institutional Investors in Expanding the
MarketInstitutional Investors Roundtable Conference
Presented by:
Mr. Aftab Ahmed Ch. Managing Director/CEO
Friday, August 23rd, 2013
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Role of Institutional Investors» Institutions can help ensure that capital
markets function as engines for economic growth
» Institutional investors:» Improve participation and price discovery in
primary market» Promote management accountability » Provide trading markets with liquidity — the
lifeblood of our capital markets» Provide stability to market in turbulent times» Sophisticated requirements help in
development of trading products at exchanges
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Infleunce of Institutional Investors
» The proportion of U.S. public equities managed by institutions has risen steadily over the past six decades, from about 7 or 8% of market capitalization in 1950, to about 67 % in 2010
» The growth in the proportion of assets managed by institutional investors has been accompanied by a dramatic growth in the market capitalization of U.S. listed companies.
» Public companies with the highest levels of institutional investment significantly outperformed those with the lowest levels.Commissioner Luis A. Aguilar, U.S. Securities and Exchange Commission
April 19, 2013-Georgia State University
Lahore Stock Exchange
Market capitalization of $50 Billion
447 listed companies
More than $12 Billion mobilized for the economy
2nd Largest stock exchange in Pakistan after
KSE4
The Lahore Stock Exchange was setup in 1970
2nd Stock Exchange to be licensed in Pakistan
The purpose for the establishment of LSE was to set up a trading venue in Punjab, which had the largest middle class and the largest number of medium
industries and business houses in the country.
LSE – Associated Companies
Associated Companies
Central Depository Company of
PakistanSole depository of sharesFormed in 1993
LSE shareholding =
10%
National Clearing
Company of Pakistan
Clearing & settlement company in
Pakistan for the three
exchanges
Formed in 1999LSE
shareholding = 24%
National Commodities
Exchange Ltd. First
automated and regulated
commodities Exchange
Formed in 2002LSE
shareholding = 17%
Pakistan Credit Rating
AgencyFirst credit
rating agency of Pakistan
formed as joint venture of IFC
& LSE
Formed In 1994LSE
shareholding = 36%
Facilities Management
Co.Operating company for
LSE’s buildingsFormed in 2013
LSE Shareholding
= 100%
Marketplace Innovation & ProtectionIndigenously developed Trading Platform called “ULTRA”
Promotes Anonymous Trading
Efficient Risk Management
Clearing & Settlement through NCCPL-Direct settlement for Institutions
Automated Depository Facilities through CDC
First Exchange to Launch SMS Trade Alerts to facilitate investors
First Exchange to explore regulatory function independence
Frequent conducting of Brokers System Audits in addition to investigative audit
LSE: At Forefront of Technological Innovation
Trading Automation
• Introduced Electronic database in 1995• Introduced Automated Trading in Pakistan in 1997• Introduced Internet Trading in 2001• Trading Floors setup in Sialkot & Faisalabad in 2005• Launched Unified Trading System in 2007
Local & International Sales
• ULTRA sold to KSE (2002) & ISE (2003)• BrokerNet sales started in 2004• ULTRA sold to Ghana Stock Exchange (2008)• Securities Lending & Borrowing Software sold in 2009
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LSE Outreach
» Trading Floor in Faisalabad
» 80 brokers’ branches in 16 cities
» More than 20% of Registered UINs predominantly retail investors
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TRADING ENVIRONMENT
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Trading Products
» Regular Market» Automated trading of Equities & Funds
» Debt Securities Trading» Automated trading of Debt Securities
» Futures» 30-days Deliverable Future Contracts» 90-days Cash Settled Future Contracts» 7-days Cash Settled Future Contracts
» Short Selling through SLB» Margin Financing» Margin Trading
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Trading VolumesYear
2000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Total Volume Million SharesPakistan
55,461
27,555
54,149
93,463
84,409
78,637
91,036
62,364
66,410
32,546
45,120
20.443
47,486
LSE9,30
34,45
910,5
2115,4
7417,4
4917,8
7911,4
757,81
82,77
23,84
41,93
6736
1,063
LSE %age
17% 16% 19% 17% 21% 23% 13% 13% 4% 12% 4% 4% 2%
20002001
20022003
20042005
20062007
20082009
20102011
2012
0%
5%
10%
15%
20%
25%
17% 16%19%
17%
21%23%
13% 13%
4%
12%
4% 4%2%
+9%+9%
B2B Affirmed LSE originated volume
The squared-up day trades and non-affirmed settlement trades may stand at twice of this amount according to a safe estimate
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MARKETPLACE DEVELOPMENT INITIATIVES
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Marketplace Revitalization
Market Related Projects
• Liquidity Network Project: Routing of orders to KSE in case of non-execution• Brokers Outreach & Expansion: Issuing new trading rights and increasing branches networks• After Hours Trading: Market timing extension to sync with US & European markets• Mobile & Web Trading: Providing ease-of-access to investors• National Market System: Attempting to unify all three exchanges liquidity pools
Product Development
• Bonds & Derivatives Development• Exchange Traded Funds• Indexes Trading• Depository Receipts
New Market Development
• SME Market• Spot Commodities Trading• Currency Trading
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Marketplace Revitalization-Listing
» Corporate advisory services for non-listed companies» Stage 1: Solicitation of interest/time for briefing via
letters/email/phone» Stage 2: Conduct of briefing/presentation at the premises of
the company/enterprise concerned» Stage 3: Signing of the Non Disclosure Agreement, if
interested for sharing the latest financial data with LSE's corporate finance team
» Stage 4: Conducting Advanced Briefing for Highlighting the Tentative Enterprise Valuation and Industry Benchmarking/Comparison
» Stage 5: Technical Briefing/Knowledge Sharing about the Pathways and Paperwork for Listing
» Stage 6: Assistance, if any, in the search for the financial advisors and other practical matters about IPO preparedness
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Marketplace Revitalization-Listing
» Listing of such companies which are listed at KSE
» Large, Medium & Small Cap Companies Listing Promotion
» Annual IPO Summits » Investors Relations Programs for
Companies » PUCAR» Corporate Data Research Portal/XBRL
reporting» Investor Relations Program
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Marketplace Revitalization-Investors Education» Campus Outreach Program
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Marketplace Revitalization-Investors Education & Awareness
» Corporate Briefing Programs» Weekly Investors Briefing Sessions &
Monthly Investors Roundtables» Investors' Service Center» Seminars/Conferences/Road Shows under
SAFE-Financial Literacy Initiative
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Marketplace Revitalization
Brokers Capacity Building» Brokers Continuous Professional Development » Preparation of Guide Book on Brokerage
Business » Business Process Efficiencies through sharing
of LSE's infrastructure
Corporate Communication, Media Relations & Public Affairs
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POSSIBLE BENEFITS TO INSTITUTIONAL INVESTORS
Working at LSE
Major Benefits of working with LSE» Becoming Client of Brokers
» Access to joint LSE-ISE liquidity pool» Robust regulatory regime for your protection» Ability to participate as financier» Enjoying general facilities & added-services offered
by the Exchange» Becoming a TREC Holder
» Brokerage Operations» Incomes through participation & preferential
treatment in projects such as LNP, Algo Trading, Spot Commodity, infrastructure projects
» Participation as financier in MT market (higher margins)
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THANK YOU
How can we be of your service?