Capital Markets in Pakistan consists of three Stock Exchanges: Karachi, Lahore and Islamabad. Thye all are merged and now call as ‘Pakistan Stock Exchange’. The principal trading activities are in ordinary shares but other securities like mutual certificates, government and corporate bonds, and TFCs are also offered in the market. Securities traded in a Pakistan Stock Exchange Limited is ordinary shares, right shares and TFCs. The major developments in Capital market included automation of trading system (KATS), CDC’s Electronic book entry system of shares handling (CDS), and independent National Clearing & Settlement System (NCSS).
The ready market means the market where trades are settled on rolling settlement basis, based on actual delivery. In Ready Market, all listed companies shares are traded during regular market time. Regular market works on T+2 settlement system.
Future market means where future contracts are traded on daily basis and settled on monthly basis. A Futures contract involves purchase and sale of securities at some future date (normally within one calendar month), at a price fixed today. These contracts are traded on an organized and regulated futures exchange enabling buyers and sellers to transact business. A futures contract gives the holder the obligation to buy or sell and both parties of a “futures contract” must fulfill the contract on the settlement date.
The CFS Market is available for the entire trading period and runs parallel to the Ready Market. In addition, the CFS Market is available for one hour and fifteen minutes after the close of trading
CFS or margin financing is the financing system available for investors who do not have money in their account to pay for the delivery on settlement date. Investors can buy and sell shares without paying for the shares bought or delivering the shares sold. Current CFS system is the replacement of old Badla system which was lacking speculation management where investors made wrong investment decisions without having basic financial resources represented by the shares sold by them or the money to pay for the shares bought by them.
CFS is segregated from the T+2 Markets and is to have Additional Margins of 2 to 5%. The CFS Margins are to increase in proportion with increase in KSE100 Index.
There are two CFS prevailing currently in the market, CFS MK I and CFS MK II. The rate of financing is determined on the last Friday / working day of the Month and applicable from the next Trading day.