The Karachi Stock Exchange has introduced computerized trading
system to provide a fair, transparent, efficient and cost effective
market mechanism to facilitate the market participants, including
the investors. The systembeing operated at Karachi Stock Exchange
is cal led Karachi Automated Trading System (KATS).The trading system comprises of various distinct segments, which are:
8.1 T+3 Settlement System:
In the T+3 settlement system, purchase and sale of securities is netted and
the balance is settled on the third day following the day of trade.
Benefits of T+3 Settlement System:
• It reduces the time between execution and settlement of trades, which
in turn reduces the market risk.
• It reduces settlement risk, as the settlement cycle is shorter.
8.2 Provisionally Listed Counter:
The shares of companies, which are not already listed and which make a
minimum public offering of a specified amount, which is presently Rs.150
million, are traded on this counter from the date of publication of
prospectus/offering document.When the company completes the process of
dispatch/credit of allotted shares to subscribers through CDC, it is officially
listed and placed on the T+3 counter. Trading on the provisionally listed
counter then comes to an end and all the outstanding transactions are
transferred to the T+3 counter with effect from the date of official listing.
8.3 Spot/T+1 Transactions:
Spot transactions imply delivery upon payment. Normally in spot transactions
the trade is settled within 24 hours.
8.4 Futures Contract:
A Futures contract involves purchase and sale of
securities at some future date (normally within one
calendar month), at a price fixed today.The number
and names of companies to be traded on the Futures
counter are determined every six months based on
the eligibility criteria approved by the SECP in this regard and which are
notified to the market participants in advance.
8.5 Odd LotsMarket:
This market has been created to provide an automated platform through
KATS enabling the investors to trade securities in lots which are less than
the normal trading units (lots) of the securities approved for Ready Market.
The minimum volume of a buy/sell order may be one share.
8.6 COT Market:
Equity repurchase transactions, better known, as “Badla” are called Carryover
trades. These are an established form of transactions used in the stock
market for temporary financing of trades by speculators and jobbers. Through
this mechanism, the purchase transaction, after its execution, is funded
through borrowing till the next day of settlement. At KSE, COT session is
run in the afternoon, to provide an efficient forum to investors and financiers.
All carry over transactions are done for a period of 10 trading days, during
which financee may release COT on any day before completion of 10 days
period, whereas financier will be able to release COT only after completion
of that period.
Difference in COT& Margin Financing
In COT, the financing is arranged by the traders after execution of trade,
whereas in Margin Financing, there needs to be a certain credit limit duly
approved before executing the trade.
8.7 OTC Market (In Process):
In order to encourage enterprising promoters to set up new industries or
expand their existing enterprises by raising finance in a cost-effective way
through listingmechanismwith comparatively lesser requirements, anOver-
The-Counter (OTC) market is proposed to be operative soon.
system to provide a fair, transparent, efficient and cost effective
market mechanism to facilitate the market participants, including
the investors. The systembeing operated at Karachi Stock Exchange
is cal led Karachi Automated Trading System (KATS).The trading system comprises of various distinct segments, which are:
8.1 T+3 Settlement System:
In the T+3 settlement system, purchase and sale of securities is netted and
the balance is settled on the third day following the day of trade.
Benefits of T+3 Settlement System:
• It reduces the time between execution and settlement of trades, which
in turn reduces the market risk.
• It reduces settlement risk, as the settlement cycle is shorter.
8.2 Provisionally Listed Counter:
The shares of companies, which are not already listed and which make a
minimum public offering of a specified amount, which is presently Rs.150
million, are traded on this counter from the date of publication of
prospectus/offering document.When the company completes the process of
dispatch/credit of allotted shares to subscribers through CDC, it is officially
listed and placed on the T+3 counter. Trading on the provisionally listed
counter then comes to an end and all the outstanding transactions are
transferred to the T+3 counter with effect from the date of official listing.
8.3 Spot/T+1 Transactions:
Spot transactions imply delivery upon payment. Normally in spot transactions
the trade is settled within 24 hours.
8.4 Futures Contract:
A Futures contract involves purchase and sale of
securities at some future date (normally within one
calendar month), at a price fixed today.The number
and names of companies to be traded on the Futures
counter are determined every six months based on
the eligibility criteria approved by the SECP in this regard and which are
notified to the market participants in advance.
8.5 Odd LotsMarket:
This market has been created to provide an automated platform through
KATS enabling the investors to trade securities in lots which are less than
the normal trading units (lots) of the securities approved for Ready Market.
The minimum volume of a buy/sell order may be one share.
8.6 COT Market:
Equity repurchase transactions, better known, as “Badla” are called Carryover
trades. These are an established form of transactions used in the stock
market for temporary financing of trades by speculators and jobbers. Through
this mechanism, the purchase transaction, after its execution, is funded
through borrowing till the next day of settlement. At KSE, COT session is
run in the afternoon, to provide an efficient forum to investors and financiers.
All carry over transactions are done for a period of 10 trading days, during
which financee may release COT on any day before completion of 10 days
period, whereas financier will be able to release COT only after completion
of that period.
Difference in COT& Margin Financing
In COT, the financing is arranged by the traders after execution of trade,
whereas in Margin Financing, there needs to be a certain credit limit duly
approved before executing the trade.
8.7 OTC Market (In Process):
In order to encourage enterprising promoters to set up new industries or
expand their existing enterprises by raising finance in a cost-effective way
through listingmechanismwith comparatively lesser requirements, anOver-
The-Counter (OTC) market is proposed to be operative soon.
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