How the PSX really works
A clear, jargon-free course on the Pakistan Stock Exchange: who runs it, how a trade happens, what the indices measure and what corporate actions mean for you.
Who's who in the market
Five institutions work together every time you buy or sell a share. Knowing who does what helps you understand where your money and shares actually are.
Pakistan Stock Exchange
The country's only stock exchange, formed on 11 January 2016 by integrating the Karachi, Lahore and Islamabad stock exchanges. It lists companies and runs the electronic trading system where buy and sell orders are matched.
Securities and Exchange Commission
The regulator of Pakistan's capital markets. It licenses brokers and other intermediaries, approves listings and public offers, sets market rules and handles investor complaints.
Central Depository Company
Holds listed securities in electronic (book-entry) form. Your shares sit in a CDC sub-account under your broker, or in an Investor Account that you control directly.
National Clearing Company
Clears and settles exchange trades, issues each investor's Unique Identification Number (UIN), and computes and collects capital gains tax on listed securities.
Brokers
Firms holding a Trading Right Entitlement Certificate from PSX and a licence from SECP. Only they can place orders on the exchange, so every retail investor trades through one.
The life of a trade
What happens between pressing 'Buy' and the shares showing up in your account.
Step 1
You place an order
Through your broker's app, website or dealer, you choose the share, quantity, order type and (for a limit order) your price.
Step 2
The exchange matches it
PSX's trading system matches buy and sell orders by price, then time. The best price goes first, and at the same price the earlier order goes first.
Step 3
NCCPL clears the trade
The clearing house confirms both sides of the trade, calculates what each broker owes and manages settlement risk.
Step 4
Settlement on T+1
One business day after the trade date, money moves between brokers and the shares are transferred between CDC accounts.
Step 5
You get confirmations
Your broker issues a contract note for every trade, and CDC can send you SMS or email alerts and periodic statements of your holdings.
Understanding PSX indices
An index tracks a basket of shares so you can see the market's direction at a glance. When people say 'the market is up', they usually mean the KSE-100.
The benchmark index. It includes the largest company from each sector, with the remaining places filled by the largest companies overall, weighted by free-float market capitalisation. Base value: 1,000 points (November 1991).
The 30 largest and most liquid companies, weighted by free-float market capitalisation. It shows how the market's heavyweights are moving.
Thirty Shariah-compliant companies selected by size and liquidity. The benchmark for Islamic equity investors and funds.
Covers all listed ordinary shares, the broadest measure of the market's overall direction.
Covers every Shariah-compliant listed company, useful for judging the whole Islamic segment of the market.
Why free float matters
Free-float weighting only counts shares that are actually available to trade, leaving out large blocks held by sponsors or the government. A company with a huge market cap but few tradable shares therefore moves the index less.
Market segments
PSX runs several markets side by side. As a new investor, you will almost always be trading in the regular market.
Regular (ready) market
Where most investors trade. You buy and sell shares at current prices and the trade settles on T+1.
Futures market
Contracts to buy or sell shares at a set price on a future date, as deliverable or cash-settled futures. Leverage makes them higher risk.
Odd-lot market
A separate market for quantities smaller than the standard trading lot, often used to tidy up leftovers from bonus or right issues.
GEM board
The Growth Enterprise Market for smaller and growing companies, with lighter listing requirements and eligibility conditions for investors.
Orders & prices
How you place an order decides the price you pay. These basics apply on every broker platform.
Market order
Buy or sell immediately at the best available price. Execution is fast, but the price can move against you in thinly traded shares.
Limit order
Sets the highest price you'll pay or the lowest you'll accept. It only fills at your price or better, so it may not fill at all.
Bid, ask & spread
The bid is the best price buyers are offering and the ask is the best price sellers want. The gap is the spread, which is narrow for liquid stocks and wide for illiquid ones.
Price limits & market halts
Each share has daily upper and lower price limits (circuit breakers), and PSX can halt the whole market after an unusually sharp index move. Check the current PSX regulations for the exact thresholds.
Corporate actions
Companies reward and raise money from shareholders in a few standard ways. Each one comes with an entitlement date, so you must hold the shares before the stock goes 'ex'.
Cash dividend
A share of profits paid in cash. On PSX it is often announced as a percentage of face value, so a 50% dividend on a Rs 10 share is Rs 5 per share. Tax is withheld before payment reaches your bank.
Bonus shares
Free extra shares issued from reserves. A 10% bonus gives one new share for every ten held. The share price adjusts down, so your total value doesn't change on the day.
Right shares
New shares offered to existing shareholders in proportion to their holding, usually below the market price. You can subscribe, or sell the entitlement while it trades.
Stock split
Lowers the face value and multiplies the number of shares, for example one Rs 10 share becoming ten Rs 1 shares. The price adjusts in proportion and your total value stays the same.
Book closure & ex-date
When a company announces an entitlement, it fixes a book-closure (record) period. Shareholders on the register at that point receive the dividend, bonus or right. Trades take a business day to settle, so the exchange sets an ex-date. If you buy on or after it, the entitlement stays with the seller. The share price typically drops by about the value of the entitlement on the ex-date.
Common questions
PSX trades Monday to Friday, except public holidays, with a pre-open session before continuous trading. Fridays have a different schedule with a midday break, and timings change during Ramadan, so check the PSX website for the current session times.
Your shares are held in your name at CDC, not on the broker's balance sheet. You can also open a CDC Investor Account for direct control. Cash left with a broker carries more risk, which is why you should only pay into the broker's official client bank account.
Trade date plus one business day. Shares bought on Monday settle on Tuesday, when they reach your CDC account and payment is due.
KSE-100 is the broad benchmark covering all sectors. KMI-30 contains only Shariah-compliant companies screened on business activity and financial ratios, such as interest-bearing debt and non-compliant income.
This material is for general education only and is not investment advice. Rules, tax rates and procedures change over time, so confirm current details with PSX, SECP, FBR and your broker before acting. See our Terms of Service.