LAHORE STOCK EXCHANGE

Lahore Stock Exchange
Lahore Stock Exchange was established in October 1970 and is the second largest stock exchange in the country with a market share of around 12-16% in terms of daily traded volumes. LSE has 519 companies, spanning 37 sectors of the economy, that are listed on the Exchange with total listed capital of Rs. 555.67 billion having market capitalization of around Rs. 3.64 trillion. LSE has 152 members of whom 81 are corporate and 54 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.
Important Developments over the Past Years
A number of significant initiatives have been taken to improve the regulatory regime and the trading environment for the benefit of Institutional Investors as well as listed companies. Although the list of such initiatives is exhaustive, below some of these incentives are touched upon;
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.
LSE has improved the quality of operations and upgraded them to modern international standards. This has included upgrading LSE’s IT infrastructure, updating regulations and procedures to incorporate existing and expected technological changes, as well as reorganizing and restructuring the workforce. As a result, LSE’s 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 LSE in improving its 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:

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.
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). LSE encourages universities and colleges to come and visit LSE.
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 hopefully 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 ORGANIZATION

Regulations
LSE, being a self regulatory organization has its own sets of rules and regulations to regulate its various activities including listing of companies/ securities on its ready board quotation, supervision of member firms to enforce compliance with financial and operational requirements, periodic checks on broker’s sales practices, and the continuous monitoring and surveillance of their trade operations.

Following is the list of Rules and Regulations of Lahore Stock Exchange.
General Rules & Regulations Regulations Governing Over The Counter (OTC)
Members’ Default Management Regulations Regulations for Proprietary Trading
The Listing Regulations Rules for Allotment of Rooms to Members
The Margin Trading Regulations 2004 System Audit Regulations
Unified Trading System Regulations Automated Trading Regulations for LOTS
Regulations for Short Selling under Ready Market Regulations Governing Risk Management
Remote Trading Terminal Issuance Policy Regulations Governing Deliverable Future Contracts
Provisionally Listing Rules and Regulation 2002 Regulations for Securities Lending & Borrowing 2004
Internet Trading Guidelines Trading Work Station (TWS) User Guide
Regulations Governing Cash Settled Futures (CSF) Contract Clearing House Procedural Manual
Regulations Governing Lse Members' Office(S)/Branch Office(S)... Investor Complaint