1. Lecture 7
Trading at KSE

2. Trading at Stock Exchange
To buy and sell shares at stock exchanges, investors have to open accounts with brokerage houses
In Pakistan, most of the brokerage houses require initial deposit of Rs.100,000, some allow deposit of Rs.50,000
There are 200 member of KSE

3. Trading at Stock Exchange
After opening an account, an investor can trade by placing orders through phone, or internet (live accounts)
Orders placed for purchase of shares are called bid order
Orders placed for sale of shares are called offer orders

4. Type of Orders Broadly classified: Two types of orders Limit Orders
Market Orders

5. Limit Orders
When an investor specifies the price at which he is willing to buy or sell, such orders are called Limit order
Limit orders are sorted on the basis of price and then on first come and first serve basis
Bid orders with highest bid price are placed at the top
Offer orders with the lowest offer prices are placed at the top

6. Orders Sorting
Orders with similar prices are sorted on the basis of first come first serve
Orders at the top are fulfilled first
Limit orders are fulfilled only when matching price is available i.e. a bid order of 100 shares at Rs.30 each will have to wait until someone offers his shares at Rs.30
Limit orders are fulfilled neither below nor above the price at which they are placed
Quantity matching is not necessary

7. Example Orders Sorting
1. A bid order of 5000 shares of NML is placed with Rs.70 a share
2. Another investor bids 100 shares of NML at Rs
SNo
Bid Q
Price
Offer Q 1
5000
70.00 -
SNo
Bid Q
Price
Offer Q 1
100
70.01 -
5000
70.00

8. 3. An order for sale of 3000 shares of NML at Rs. 72 is placed
4. A purchase order of 700 share at Rs is placed
SNo
Bid Q
Price
Offer Q 1
100
70.01
3000 72 2
5000
70.00
SNo
Bid Q
Price
Offer Q 1
100
70.01
3000 72 2
700 3
5000
70.00

9. 5. Someone offers 1000 shares of NML at Rs.70.01 a share
6. A bid order to buy 1000 shares at market is placed
SNo
Bid Q
Price
Offer Q 1
5000
70.00
200
70.01
3000
72.00
SNo
Bid Q
Price
Offer Q 1
5000
70.00
2200
72.00

10. Market Orders
Orders that are to be executed immediately at currently placed limit orders. It doesn’t have any price or time restriction
If a market order is not completely fulfilled from the top limit order, it is fulfilled from the next limit order in the sequence

11. Types of limit orders
Stop Loss order: The stock has to be sold if its price falls bellow stipulated level
Allow investor to avoid unexpected losses
Also useful in very uncertain markets
At KSE, maximum variation in prices is 5% per day
One can place stop loss order at 3% and avoid the 2% loss, if anything abnormal happens with the stock

12. Stop-Buy Orders: Specifies that a stock should be bought when price of a security rises above a limit
It is usually used with short-sell to limit possible losses from short position
At KSE, orders have a validity of one day

13. Broker’s Commission; Live Trade Online