FEDERATION OF EURO-ASIAN STOCK EXCHANGES > YEARBOOK 2002/2003 > PAGE 52
LAHORE STOCK EXCHANGE
L E T T E R F R O M T H E CEO
The markets witnessed a positive shift
as the geo-political scenario
underwent considerable change.
The fiscal year 2001-2002 was a significant
year in the history of local stock markets of
Pakistan. The markets witnessed a positive
shift as the geo-political scenario underwent
considerable change. During the year 2002,
the LSE-101 Index gained 1.53 points (32%)
to finish at 6.32 on November 30, 2002. The
Exchange launched the new LSE-25 Index in
December 2002 which has replaced the LSE-
101 Index. During the year 2002, turnover
at the Lahore Stock Exchange (LSE) (including
trading and carry over) was 27.3 billion shares
as compared to 7.6 billion shares in 2001,
thus increasing 2.88 times.
Market reform remained at the forefront of
our agenda.
We adopted T+3 settlement system for all
traded shares in December 2001.
Short selling regulations were introduced in
June 2002.
The Securities and Exchange Commission of
Pakistan (SECP) implemented the process of
broker registration and made it mandatory
from 1 January 2002 for all working brokers.
Members are actively monitored as well as
listed companies for compliance with the
Rules and Regulations of the exchange.
The Code of Corporate Governance was
incorporated in the Listing Regulations of the
Lahore Stock Exchange (LSE). This was an
SECP requirement and was welcomed by the
LSE as a benefit to investors.
These measures and vigorous efforts toward
investor protection by the LSE have been
instrumental in improving the image of our
market in the eyes of investors. Combined
with improved economic fundamentals these
provide the market with a sound base for
sustained growth. In order to promote and facilitate financing
activities in the market, it was decided that
banks and financial institutions be made
associate members of the LSE Clearing
House, enabling them to settle directly with
the Clearing House instead of through a
member of the LSE.
Our major objective remains to provide
investors with efficient and transparent
trading, safe and secure settlement and
accurate and timely information
dissemination. The LSE implemented a fully automated
Trade Risk Filter (TRF) to monitor members’
trading exposures on real time basis. This
has been a quantum leap for improving our
risk management systems.
A debt capital market is steadily developing
in Pakistan. The issuance of a growing
number of Term Finance Certificates (TFCs)
by domestic companies is very encouraging.
During the year 2001-2002, LSE listed 7 TFCs
with a total issue size of US$ 83 million. The LSE had developed the Ultra Trade
software in house and implemented it in
October 2000. This software runs the trading
engine at the LSE and related systems. This
system was subsequently provided to the
Karachi Stock Exchange on commercial terms
and was commissioned at the KSE in March
2002. Our software development team has
also developed a back office system to
automate the brokers’ offices and link them
with the Ultra Trade System. Currently, the
system is fully functional and is being used
on a test basis by a number of members.
The LSE started trading in single stock futures
contracts at the exchange in February 2002.
Currently, 17 futures contracts are traded at
the LSE.
The National Clearing and Settlement System
became operational in December 2001. It
linked up the settlement system of three
stock exchanges and over a period of time
will introduce state-of-the-art functions such
as direct institutional participation, stock
borrowing and lending.
Samir Ahmed
CEO/Managing Director
HISTORY AND DEVELOPMENT
The Lahore Stock Exchange (LSE) was
established in 1970 in Lahore, the provincial
capital of Punjab, Pakistan under the 1969
Securities and Exchange Ordinance. The LSE
has now become a key institution in the financial
sector of Pakistan and has a membership of 151
brokerage houses. Currently, there are 569 listed
companies, having a listed capital of Rs. 279.8
billion (approximately US$ 4.82 billion), a market
capitalization of Rs. 549.1 billion (approximately
US$ 10.2 billion) and an average daily turnover
of 110.1 million shares, including trading and
financing transactions.
The activities of the Exchange have increased in
all areas since inception. Its share turnover has
increased substantially, as has the number of
investors. However, much more must be done.
The goal is to bring the LSE to international
standards in operational, technical, regulatory
and quality management areas and to ensure
that not only domestic but also foreign investors
are attracted to the Exchange.
FUTURE OUTLOOK
The LSE will continue to develop its market by:
upgrading the automated trading system, Ultra
Trade, which will include more features while
taking into account new technology, risk
management techniques and regulatory
requirements;
promoting and selling Ultra Trade to other
interested stock exchanges, especially among
developing markets;
upgrading an in-house back-office system for
brokers;
providing more Internet trading connections to
members of the exchange;
creating a separate and larger section for trading
debt instruments while stimulating the
development of an active secondary market;
developing the futures contracts market to
promote further liquidity;
developing innovative products for the market
in order to make a meaningful contribution to
the growth of the economy through capital
formation and its effective utilization; and
taking further regulatory steps in the interest of
investors protection including efficient disposal
of investor claims.