Overview of Brokerage House
A brokerage firm facilitates the process of investing and transacting on the Pakistan Stock Exchange (PSX) by helping individuals open accounts. Acting as an intermediary, the broker matches buy and sell orders between customers and third parties. Compensation for brokerage services is typically earned through commissions or fees paid by the customer or the exchange upon successful completion of transactions. In addition to transactional services, brokerage firms often provide a range of other offerings, including money management, tax advice, and financial consultation. They also furnish clients with up-to-date stock quotes, economic environment research, and market analysis.
Following are the Top 10 Brokers – Most Active Accounts
| 6 – Ktrade Securities Limited | 6 – Ktrade Securites Limited |
| 2 – M. Munir Khanani Securities Limited | 7 – Foundation Securities (Pvt.) Ltd. |
| 3 – Arif Habib Ltd. | 8 – MRA Securities Limited. |
| 4 – JS Global Capital Ltd. | 9 – Darson Securities Private Limited |
| 5 – BMA Capital Management Limited | 10 – IGI Finex Securities Limited |
Refer https://www.psx.com.pk/psx/resources-and-tools/investors/top-10-brokers
How Trading Process works?
Trading
- By the dealer (offline facility)
- Online facility (By the Client himself through a web-based application connected with ” brokers Software”)
Web-based application maintain details of each transaction including time, number of shares purchased/sold, and who executed the trade i.e. the dealer or the client himself from his terminal.
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What is the Role of KATS
KATS is the short form of Karachi Automated Trading System, KATS is the automated system over which trading is done, orders are placed either by the client directly on KATS through an application or by the broker on instructions by client in case of offline facility.
What is the Role of Central Depository Company (CDC)
CDC is the sole custodian of electronic shares and manages the transfer of shares among the account holders. Each member (brokerage house) is assigned a Participant account, under which sub-accounts for customers are opened for every account holder
What is the Role of the National Clearing Company of Pakistan (NCCPL)
NCCPL is the clearing company that is assigned to clear the trading between the members of KSE.
Every member is required to open a dedicated client group account for its customers. NCCPL is given complete authorization over this bank account.
When there exists a net payable to member, the bank account is credited with the net amount payable. Also when there is a net receivable the same bank account is debited with the amount.
Brokerage houses earn the Revenue (Income) by providing the following Services:
- Commission on Trades: The primary source of income for brokerage houses is the commission charged on executing trades for clients. The commission is charged on the different slab rates, however minimum charge of commission has been outlined by PSX.
- Margin Financing: Brokerage firms often provide margin financing services to clients, allowing them to trade with borrowed funds. They earn interest on the margin loans provided to clients, thereby generating additional revenue.
- Underwriting and IPO Fees: Brokerage houses participate in initial public offerings (IPOs) as underwriters or syndicate members. They earn fees for helping companies go public and facilitating the IPO process.
- Investment Advisory Services: Many brokerage firms offer investment advisory services to clients, providing research reports, market analysis, and investment recommendations for a fee.
- Portfolio Management: Some brokerage houses offer portfolio management services where they manage clients’ investment portfolios. They charge fees based on the assets under management or performance-based fees.
- Custodial Services: Brokerage firms may provide custodian services to institutional investors, managing and safekeeping their securities. They earn fees for providing these services.
- Corporate Finance: Larger brokerage firms may offer corporate finance services such as mergers and acquisitions, corporate restructuring, and capital raising for corporate clients. They earn fees based on the value of transactions and advisory services provided.
Minimum Brokerage Commission Slabs (As Per Annexure-III of Chapter 4 of PSX Regulations)
STANDARD RANGE/ SCALE OF BROKERAGE COMMISSION ON DIFFERENT TYPES OF TRANSACTIONS
| SR. # | TRANSACTION TYPE | *MINIMUM RATE | EXPLANATION |
| 1 | Ready Delivery Contract Market (“Ready Market”) – Normal | 3p or 0.15% whichever is higher | On every buy and sell transaction which is not squared during the same Trading Day. |
| 2 | Ready Market – Intra-Day Squared | 3p or 0.15% whichever is higher | On one side – either on buy side or sell side trade |
| 3 | Fixed Income ETF – Normal | 1p or 0.01% whichever is higher | On every buy and sell transaction which is not squared during the same Trading Day. |
| 4 | Fixed Income – Intra-Day Squared | 1p or 0.01% whichever is higher | On one side – either on buy side or sell side trade |
| 5 | Arbitrage between Ready and Future Market | No minimum rate of commission | – |
| 6 | Ready Market Trade financed through Margin Trading System/ Margin Financing System/ Morabaha Share Financing | 3p or 0.15% whichever is higher | Minimum commission on Ready Market purchase or sale only. No minimum commission on Margin Trading System, Margin Financing System market and Morabaha Share Financing transaction. |
| 7 | Deliverable Futures Contract Market | 3p or 0.15% whichever is higher | Minimum commission on every buy and sell transaction which is not squared during the contract period. |
| 8 | Deliverable Futures Contract Market – Squared Transaction | 3p or 0.15% whichever is higher | Minimum commission on one side – if transaction is squared-up in Deliverable Futures Contract Market either through offsetting transaction or rollover. |
| 9 | Proprietary Trade and trades of Sponsors and Directors of the Securities Broker and their immediate family members** | No minimum rate of commission | – |
* The prescribed range is from minimum brokerage commission, as mentioned above, up to 2.5% of the transaction value in the above-mentioned transactions.
** Immediate family member means spouse, children and parents.
NOTES:
- Commission is exclusive of levies.
- Rates in each type of transaction can be scaled up within the minimum and maximum ranges.
- Minimum rate of brokerage commission shall not be applicable on any other markets or transactions not mentioned herein above.
- The Commission may provide clarification and treatment in respect of applicability of standard range/ scale of brokerage commission on different types of transactions
