How do I begin to invest in the stock market?

How to Start Online Stock Trading in Pakistan?

Pakistan’s stock market is now viable for international and domestic investment. As of May of 2017, MSCI Global reclassified the major Pakistani stock indexes from Frontier Markets to Emerging Markets during the company’s May 2017 Semi-Annual Index Review. In addition, the country’s three major exchanges in the cities of Lahore, Karachi and Islamabad merged their operations in January of 2016 to become the Pakistan Stock Exchange Limited (PSX).

In order to invest and trade in stocks in Pakistan, you must first open an account with a reputable Pakistani broker. Keep in mind that not all brokerages are created equal, so make sure to carefully consider your needs before opening an account.

What You Need to Know Before You Start?

The Pakistan Stock Exchange (PSX) and all other financial institutions, including stock brokers, are overseen by the Securities and Exchange Commission of Pakistan (SECP). In addition to the regulation of the corporate sector and capital markets in Pakistan, the agency regulates the insurance industry, credit rating agencies, stockbrokers, surveyors, non-banking financial companies and private pension schemes.

If you are a Pakistani national and live in Pakistan, you must have a funded Pakistani bank account and the proper national identification documents to confirm your identity to open a brokerage account. If you are not a Pakistani national and/or live outside of Pakistan and wish to invest in the Pakistan stock market, then you must comply with certain additional requirements.  

Non-residents, including non-resident foreign nationals (NRFs) and non-resident Pakistani nationals (NRPs), can invest in Pakistan along with foreign institutional investors (FIIs) by meeting particular requirements. In order to trade stocks in Pakistan, all NRPs, NRFs and FIIs are required to open an account with a Pakistani bank offering custodial services.  

A custodial bank account is actually made up of two accounts: a special convertible rupee account to hold cash at the bank and a linked securities account to hold the stocks you purchase. You will also need to open a depository account with the Central Depository Company and the State Bank of Pakistan to hold securities and government bonds.

Yet another account must be opened at a custodian bank for you to be issued a unique market identifier (UIN) number, which identifies you in the market. NRFs, NRPs and FIIs must open all these accounts at custodian banks before they can open an account with a Pakistani stockbroker, in addition to providing identification, bank information, etc.

Open a Brokerage Account.

If you live in one of the major cities in Pakistan (Karachi, Lahore or Islamabad) you should have no problem locating an online stock broker in your area. If you have a bank account at a Pakistani bank, you can open a broker account online by providing the proper identification and proof of residence. You can also visit the broker in person and open an account at their office or branch.

For NRFs, NRPs and FIIs, once you have completed all the steps mentioned in the previous section, then you can open an account with a registered Pakistani stockbroker. If you have no interest in trading local stocks from Pakistan and instead would prefer to trade international markets, you can open an account with an international broker like Interactive Brokers that accepts clients from Pakistan.

Make Your First Trade

If you’ve decided on a top broker to open an account, you can start by filling out the required paperwork and providing identity documentation.

In the meantime, you can download the trading platform and get it set up on your computer, tablet and/or mobile device.

Once your account is open and you have identified a good stock or another asset to take a position in, just enter an order on your stock broker’s platform to get started.