The Role of Institutional Investors in Expanding the Market Institutional Investors Roundtable...

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

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