An Overview of Operational Activities Followed By Dhaka Stock Exchange Ltd (DSE)
(DSE-Growth, Development, Organization & Management.)
2.1 Historical Background
The Necessity Of Establishing A Stock Exchange In The Then East Pakistan Was First Decided By The Government When, Early In 1952.It Was Learnt That The Calcutta Stock Exchange Had Prohibited The Transactions In Pakistani Shares And Securities. The Provincial Industrial Advisory Council Soon Thereafter Set Up An Organizing Committee For The Formation Of A Stock Exchange In East Pakistan. A Decisive Step Was Taken The Second Meeting Of The Organizing Committee Held On The 13th March 1953. In The Cabinet Room, Eden Building, Under The Chairmanship Of Mr. A. Khaleeli, Secretary Government Of East Bengal, Commerce, Labor And Industries Department At Which Various Aspects Of The Issue Were Discussed In Detail. The Then Central Governments Proposal Regarding the Karachi Stock Exchange Opening a Branch At Dhaka. , Did Not Find Favor With The Meeting Who Felt That East Pakistan Should Have An Independent Stock Exchange. It Was Suggested That Dhaka Narayanganj Chamber of Commerce & Industry Should Approach Its Members For Parchase Of Membership Cards At RS.2000 Each For The Proposed Stock Exchange. The Location of the Exchange It Was Thought Should Be either Dhaka Narayanganj or Dhaka. An Organizing Committee Was Appointed Consisting Of Leading Commercial And Industrial Personalities Of The Province With Mr. Mehdi Ispahani As The Convener In Order To Organize The Exchange.
The Chamber Informed Its Members And Members Of Its Affiliated Associations Of The Proceedings Of The Above Meeting, Requesting Them To Intimate Whether They Were Interested In Joining The Proposed Stock Exchange. This Was Followed By A Meeting, At The Chamber Of About 100 Persons Interested In The Formation Of The Exchange On 07.07.1953. The Meeting Invited 8 Gentleman To Become Promoters Of The Exchange With Mr. M Mehdi Ispahani As The Convener And Authorized Them To Draw Up The Memorandum And Article Of Association Of The Exchange And Proceed To Obtain Register Under The Companies Act.1913. The Other 7 Promoters Of The Exchange Were Mr. J M Addision-Scott, Mr. Mhodammed Hanif, Mr. A C Jain, Mr. A K Khan, Mr M Shabbir Ahmed And Mr. Sakhawat Hossin.
It Was Also Decided That Membership Fee Was To Be Rs.2000 And Subscription Rate At 15 Per Month. The Exchange Was To Consist Of Not More Than 150 Members. A Meeting Of The Promoters Was Held At The Chamber On 03.09.1953 When It Was Decided To Appoint Orr Dignam & Co., Solicitors To Draw Up The Memorandum And Articles Of Association Of The Stock Exchange Based On The Rules Of Stock Exchange Existing In Other Countries And Taking Into Account Local Conditions.
The 8 Promoters Incorporated The Formation As The East Pakistan Stock Exchange Association Ltd. On 28.04.1954. As Public Company. On 23.06.1962 The Name Aws Revised To East Pakistan Stock Exchange Ltd. Again On 14.05.1964 The Name Of East Pakistan Stock Exchange Limited Was Changed To “Dhaka Stock Exchange Ltd.”
At The Time Of Incorporation The Authorized Capital Of The Exchange Was Rs. 300000 Divided Into 150 Shares. Of Rs. 2000 each and by an extra ordinary general meeting adopted at the extra ordinary general meeting held on 22.02.1964 the authorized capital of the exchange was increased to Tk. 500000 divided into 250 shares of Tk. 2000 each. The paid up capital of the exchange now stood at Tk.460000 dividend into 230 shares of Tk. 2000 each. However 35 shares out of 230 shares were issued at TK. 80, 00,000 only per share of TK. 2000 with a premium of TK. 79, 98,000.
Although incorporated in 1954, the formal trading was started in 1956 at Narayanganj after obtaining the certificates of commencement of business. But in 1958 it was shifted to Dhaka and started functioning at the Narayangonj chamber building in Motijheel C/A.
On 1.10.1957 the stock exchange purchase a land measuring 8.75 Kattah at 9F Motijheel C/A from the Government and shifted the stock Exchange to its own location in 1959.
The Dhaka stock exchange will create a successful well-organized and transparent market of international standard to save and invest in Bangladesh in order to facilitate the competent entrepreneurs to raise capital and speed up industrial growth for overall benefit of the economy.
2.3 Visions for Future
The stock has a clear and specific vision for the future, Enhancing bond market through bringing in government and municipal bonds beside the corporate bonds, Bringing all securities under CDS in 2 years. Bringing all the corners of the country under trading network through the on going expansion and up gradation projects of DSE Bringing internet based traded trading creating provisions for investment and settlement from any where in the world
Ensure greater degree of transparency in financial disclosure for better corporate governance,
Making the market competitive in terms of regional securities market perspective through ensuring market friendly rules and regulatory framework, Initiating the process of creating derivative and future market.
The prime objective of the DSE is to create a nation-wide stock market also beyond the national boundary, which will simultaneously act as a platform for industrial entrepreneurs and general investors. Explicitly the objectives of DSE are Following:
To develop a strong platform for the entrepreneurs for raising capital.
To provide an investment opportunities for small and large-scale investors.
To develop a transparent market ensuring investors interest.
To provide a fully automated trading, Clearing and settlement system to ensure quick, easy, accurate and easily accessible to all transactions.
To attract non-resident Bangladeshis to invest in Bangladesh Stock market.
To attract foreign institutional investors to invest in Bangladesh stock market.
To collect, preserve and disseminate data and information on stock market.
To develop a corporate culture through mandatory corporate membership.
To develop a research cell for analyzing status of the market and economy.
2.5 Board of Directors and Management
Main task of the board of director is making policy. DSE has a policy making body of 24 members, 12 are elected and 12 selected councilors. The board members at present are as follows:
2.6 Rules and Regulations
The Dhaka Stock Exchange’s activities are regulated by the following Acts & Regulations:
Companies Act, 1994.
Securities and Exchange Commission Act, 1993
Securities & Exchange Commission Act, 1993 (Act repelling controller brokers)
Dhaka Stock Exchange
a) By laws, b) Listing rules, c) Memorandum of Association, d) Articles of
Association and e) Settlement of Transaction & Regulation.
DSE had many new rules and regulation as well as amendments in the rules & regulation of Stock Exchange, Issues in the overall capital market. Some major ones are as follows:
§ The National Parliament passed “The Depository Act, 1999” on the 5th of April 1999.
§ SEC adopted “ Public Issue Rules 1998” which was gazette on the 25th January 1999 and subsequently brought some amendments in this rule on the 28th April 1999.
§ SEC has approved the “Margin Rules 1999” to facilitate proper administration of credit facilities extended by the brokers to their clients and to enhance liquidity in the Exchange.
§ The cabinet on June 7th, 1999 approved the amended to the “Trust Act 1882” to facilitate the investment of 25% of pension and insurance funds in the capital market.
§ SEC has extended the time limit for brokers/dealers to continue underwriting business from 30 to December 31, 1999.
§ SEC amended the “Securities & Exchange Rules 1987” with a view to removing the “Counter Party Identification” facility from the trading of the Stock Exchange.
§ SEC amended the “Settlement of Stock Exchange Transactions Regulations 1998” envisaging stern measures against defaulters for failing to deliver securities or make payment within stipulated time.
§ DSE has a policymaking Body of 24 members, of whom 12 are elected and 12 are selected councilors.
Dhaka Stock Exchange (Member’s Margin) Regulations, 2000
In exercise of the powers conferred by section 34(1) of the Securities and Exchange Ordinance,
1969 (Ordinance No. XVII of 1969), the Dhaka Stock Exchange Limited makes, with the
Approval of the Securities and Exchange Commission, the following regulations, namely:-
1. Short title. – These regulations may be called the Dhaka Stock Exchange (Member’s
Margin) Regulations, 2000.
2. Definitions. –
(a) in these regulations, unless the context otherwise requires,-
“Additional trade exposure” means the amount of the aggregate (gross) trade exposure exceeding the free limit for each member; “aggregate (gross) trade exposure” means total buys and total sales position of a member at any point of time during a trading day; “clearing house” means the clearing house set up by the Exchange; “direct settlement” means direct settlement between the members under the Settlement of Stock Exchange Transactions Regulations, 1998; “Exchange” or DSE means the Dhaka Stock Exchange Limited; “free limit” means the amount of the aggregate (gross) trade exposure for each member on which no member’s margin shall be applicable; “instruments” means the papers and documents including cash for the purpose of members’ margin; “member” means a member of the Exchange who is registered as the stock- dealer or stock-broker by the Securities and Exchange Commission under the Securities and Exchange Commission (Stock-dealer, Stock-broker and Authorised Representative) Regulations, 1994; “member’s margin” means the margin deposited by a member with the clearing house under these regulations; “security deposit” means the amount compulsorily deposited by each Member with the clearing house as prescribed by the Exchange.
(b) Words and expressions used herein but not defined shall have the same meanings
Respectively assigned to them in the Securities and Exchange Ordinance, 1969 (XVII
Of 1969), Securities and Exchange Commission Act, 1993 (XV of 1993), and the
Rules and regulations made thereunder.
3. Free limit. – The free limit shall be taka one crore per trading day.
4. Member’s margin. –
(1) Every member shall, in addition to the security deposit, deposit with the clearing house, free of interest, as member’s margin an amount at the rate specified in sub-regulation (3) on his additional trade exposure within one hour of his exceeding the free limit failing which his trade shall remain suspended.
(2) Transaction for direct settlement between members shall be excluded from
calculation of the aggregate (gross) trade exposure.
(3) Every member shall deposit the member’s margin with the clearing house on the
Additional trade exposure at the following rates:-
Additional trade exposure Member’s margin rate
(a) Up to taka two crore @ 5%
(b) Above taka two crore but not exceeding taka five crore @ 7.5%
(c) Above taka five crore but not exceeding taka seven crore and fifty lac @ 15%
(d) Above taka seven crore and fifty lac but not exceeding taka ten crore @ 25%
(e) Above taka ten crore but not exceeding taka fifteen crore @ 50%
(f) Above taka fifteen crore but not exceeding taka twenty crore @ 75%
(g) Above taka twenty crore @ 100%
5. Instruments for member’s margin.- (1) The following instruments shall be the instruments for the member’s margin :-
(a) Irrevocable and Without Recourse to the Drawer Bank or Insurance
(b) Government securities;
(c) Fixed Deposit Receipt issued by any scheduled bank;
(d) Sanchay Patra and Defense Saving Certificate issued by the Government of
(e) Life Insurance Policy at surrender value;
(f) Demand Draft or Payment Order issued by any scheduled bank;
(g) Securities listed with the Exchange (valued at seventy percent of the lowest market price prevailed in the Exchange in the previous week); and
(2) The instruments mentioned in clause (a), (b), (c), (d), (e), (f) or (g) under sub- regulation (1) shall be endorsed in favor of the Exchange.
(3) 90% of the value of the instruments mentioned in sub-regulation (2) shall be considered as the value of the member’s margin deposited under these regulations.
6. Adjustment or refund of member’s margin. –
(1) The Exchange, in addition to other available recourses, shall, without giving any prior intimation to the member concerned, immediately realize the value of the instruments deposited by a member as member’s margin and adjust the amount so realised against the dues of the member concerned, if he fails to settle his trade with the clearing house on the settlement day.
(2) The member shall be liable to pay the shortfall, if any, to the clearing house which remains after making the adjustment as per sub-regulation (1), including the costs, interest, charges and expenses involved in the realization process, within three days of the written notice of demand issued to him by the Exchange.
(3) The Exchange shall issue the notice of demand within twenty-four hours of realization of member’s margin as per sub-regulation (1).
(4) The notice of demand shall contain, among others, details of the dues, the amount realized against member’s margin, the costs, interests, charges and expenses involved in the realization process, and the amount that remains outstanding for payment by the member to the clearing house.
(5) The Exchange may either retain the unutilized member’s margin or refund the same to the member concerned within twenty-four hours of receipt of the member’s request in writing in this respect.
(6) Trade of the concerned member shall remain suspended until full realization from him the amount mentioned in the notice of demand as per sub-regulation(4).
7. Maintenance of books and records.- (1) The clearing house and every member shall maintain proper books and records in respect of the member’s margin in such Form as the
Exchange, with the prior approval of the Commission, prescribes from time to time.
(2) The books and records maintained under sub-regulation (1) shall always be kept updated and ready for inspection by the Exchange or by the Commission.
8. Power to grant exemption. – The Commission may, from time to time, exempt any Order or trade of any member from all or any of the provisions of these regulations.
Whereas, the Securities and Exchange Commission deems it to be expedient that, in the interest of the investors and the capital market, certain further amendments should be made in the Dhaka Stock Exchange (Member’s Margin) Regulations, 2000 and Chittagong Stock Exchange (Member’s Margin) Regulations, 2000. Now, therefore, the Securities and Exchange Commission, in exercise of its power conferred by section 34, sub-section 4 of the Securities and Exchange Ordinance, 1969 (XV11 of 1969), Hereby directs the Dhaka Stock Exchange Ltd. and the Chittagong Stock Exchange Ltd. to amend Their respective Member’s Margin Regulations, 2000 in the following manner which shall have Immediate effect.
Regulation 3 shall be substituted by the following:
“3. Free limit-The free limit shall be taka one crore per trading day.” Regulation 4(3) will be substituted by the following: –
“4. (3) Every member shall deposit the member’s margin with the clearing house on the additional trade exposure at the following rates:-
Additional Trade Exposure Member’s Margin Rate
(a) above taka one crore but not exceeding taka two crore @20%
(b) above taka two crore but not exceeding taka three crore @ 30%
(c) above taka three crore but not exceeding taka five crore @ 50%
(d) above taka five crore @ 100%
Regulation 5 (1) (a) shall be substituted by the following:
“5 (1)(a) Irrevocable and Without Resource to the Drawer Bank or Insurance Guarantee or
Guarantee issued by the non-banking financial institution (NBFI) registered with the Bangladesh
Bank provided such NBFI is lawfully authorised in this behalf.”
By order of the Commission
2.7 The Organ gram of DSE
The Organ gram of DSE
2.7 Committees of DSE:
DSE has the following committees are working in DSE for smooth running of the organization.
Ø Administrative Committee.
Ø Trading Committee.
Ø Finance Committee.
Ø Listing Committee.
Ø Surveillance Committee.
Ø Arbitration Committee.
Ø Human Resource Committee.
Ø Automation Committee
Ø Land and Building Committee.
Activities of various Departments
The Various department of Dhaka stock exchange are as follows:
? Compliance Section:
? Listing and Membership Department
? Surveillance Department
? Inspection and Auditing
? Other Sections:
? Systems Department (I.T)
? Clearing and Settlement Department
? Accounts & Finance Department
? Research & Development and Public Relation Department
The functions of various departments are discussed in respective heads below:
3.1 Listing and Membership department:
Every company must be listed in the Stock market for working thereon and they have to fulfill various formalities. The Listing and Membership department deals with the various formalities of listing and membership with DSE. Formalities related with the enlistment of a company and membership and discussed in below.
If the companies willing to expand their market may apply for listing with the DSE, according to the manner prescribed in the Listing Regulations. ‘Listing Company’ means a Company or a body corporate or corporation, which has been listed in accordance with the regulations, and whose securities are listed and include provisionally listed companies. Unless the company or the securities have been listed and permission for such dealing has been granted, no dealings in securities of a company shall be allowed.
Eligibility for Listing
The Company has to be a Registered Public Ltd. that must be incorporated in Bangladesh under the Companies Act.1994 with the office of the Registered of Joint Stock Companies and Firms. Shares to a listed company can be issued through primary market or secondary market.
Application of listing
Application for listing in the stock exchange should be made as per Form 1, under Section (9) of the Securities and Exchange Ordinance -1969 Section 140 of the Companies Act. 1994, within 10 days from the date of publish of the Company’s prospers. The stock exchange shall grant permission within a maximum period of 3 months from the date of receipt of listing application. In case, the permission is refused, the reason thereof will be communicated to the applicant and also to the Securities & Exchange Commission within 2 weeks of the decision. If reused, the applicant may move a fresh application after six months from the date of such refusal unless the Board otherwise decides.
Documents to be submitted
At the time of applying for the listing, the following documents to be submitted: In case of Participatory capital, a copy of the trust deed. Copies of audited accounts for the last 5 completed years or a shorted
Number of years if the company has been in existence only for such
A Memorandum and Articles of Association.
Brief history of the company since incorporation giving details of its Activities including any re-organization, changes in its capital structure And borrowings.
Copy of Agreements of other documents relating to arrangements with
Or between Vendors, Promoters, Underwriters, Brokers.
Certified copies of agreement with Managing Agent, Selling Agent,
Managing Director and Technical Director.
A statement containing Particulars of material contracts.
Certified copies of Agreement with BSB, BSRS, ICB and any other
Form 2 as printed in the listing regulations.
A deed of Unconditional Undertaking to abide by the listing regulations of the DSE.
Nobody can participate in the stock trading without being a member of stock exchange. There are two types of member-
a) Dealer: They can act as principal any buy for their own accounts and sell securities from their own inventories.
b) Broker: They act as agents of others and receive a commission from their clients. They have no rights to buy or sell from their own inventories.
The same firm or individual member may act as either a broker or a dealer at different times and in different transactions in the secondary market.
Application for Membership
As per company resolution, to get the membership in DSE, it is necessary to form a limited company and one director will have to be selected as the representative for dealing with the stock exchange. An application to be submitted as per “Form-Ka’ along with the following documents:-
?Memorandum of Association, Articles of Association of the company.
? Tax clearance certificate.
? Letter regarding permission for on-line trading.
? Deed of Declaration as per clause 5 (b) of General Rules and regulations of DSE.
? Two copies stamp size recent photograph.
3.2 Surveillance Department:
Dhaka stock exchange has its own surveillance system to control and monitor the market activities particularly regarding the scrip traded. Surveillance Department keeps a close watch on price-movement of scrip; detect market manipulation and monitor abnormal prices and volumes, which are not consistent with the normal trading system. The activities of this department are mentioned here in below-
Circuit Breaker Control
Circuit breaker is a common and widely used system across the Stock Exchange world wide to control the abnormal fluctuations of share prices. The limit of Circuit Breaker at Dhaka stock Exchange is mentioned in this report while discussion the activities of market Operation Department. Presently, the following rules govern the Circuit Breaker percentage value or absolute circuit breaker value:
Ø In case of disclosure of news in any scrip, the circuit breaker percentage will be changed to a Market Operations specified value and will persist at this value for a specified number of days.
Ø For new scrip, for specified number of days after the first trading day, the percentage is a Market Operations specified value. Till the first trading day for that scrip, there will be no circuit breaker percentage.
Ø In case of book closure, the Exchange will provide an absolute value of circuit breaker, which will be used for a Market Operation specified number of days, following which it will revert back to the old value of the circuit breaker.
Suspension of Scrip:
When price rigging can’t be controlled even after applying the existing surveillance measures or if any serious irregularities such as large quantity of bad deliveries, circulation of fake share certificates in the market etc. is noticed in the market Exchange can suspend trading of those scrip for a period depending on the situation.
Surveillance Department of the Exchange on a day-to-day basis carries out a thorough study of the trading pattern of the top 10 scripts by turnover. Such analysis covers the price, turnover volume and value activity by various members in each of the scripts and also the fundamentals of the Company.
Monitoring newly listed shares
As per the instruction of SEC circuit breaker is not applied to the newly listed shares for the first five market days. Trading pattern in this five days of the newly listed shares are analyzed by this department to detect whether the members have entered into any manipulation or circular trades to artificially prop-up or prop-down the prices. If any certain irregularities are observed, the Disciplinary Committee takes action against such member.
Suspension of Traders/Brokers
Depending on seriousness of irregularity noticed in a member’s trading, his/her trading terminal is suspended until such time the issue is resolved.
The other activities of this department are:
? Watching net high-low position.
? Taking Disciplinary Action.
? Investigation into specific deals of Broker/Dealers.
The surveillance functions are conducted through the surveillance module of the computer system. This system usually runs manually. The surveillance department through its wide information source carries out this function.
3.3 Inspection and Auditing Department :
There are two types of inspection likely –
Regular Inspection – In a regular inspection, the inspectors check whether the brokers are maintaining all the books of accounts.
Spot or Special Inspection – In this sort of inspection the inspectors make a surprise visit or it is done on a particular item.
We can write down the functions of this department as follows –
1. Checking whether the brokers are maintaining rules and regulations under SEC, company act, and income tax law.
2. Making physical visit to the broker houses as per the command of SEC or Surveillance department of DSE.
3. Scrutinizing the draft prospectus of IPO, and commenting over that. The SEC decides whether to allow the IPO on the basis of the comment made. Hereby the following points are considered for assessing the draft prospectus of IPO –
I. Familiarity of the directors.
ii. Who are holding the shares (Foreign or local or corporate investors.)?
iii. List of top executives.
iv. Factory size, product type etc.
v. Credit rating of the company as per various credit rating agencies (for example–CRISL).
4.Preparing internal report and forwarding to SEC if needed.
3.4 System Department:
System department is very important department of DSE. This department is also known as Information Technology (I.T) department. Following are the functions of this department:
To maintain technical soundness for the entire DSE.
To develop Software
To store and Print out all data.
Information providing to various departments.
To advise the brokers about their technical difficulties.
System followed by the department
Central Server/Status C400 series.
3 PA-RISC Processor.
4 Fault tolerant continuously available.
5 16 GB Hard disk.
6 512 MB RAM.
7 512 KB Cache Memory.
8 Speed 96 MHz.
10 OLTE (Optical Terminating Equipment).
11 U.P.S (Urgent Power Supply)
12 Data Storage………….. DAT (Digital Audio Type).
a) Application Software
DSE Version of the VECTOR (Versatile Engine for Centralized Trading & On-line Reporting) has three Modules:
?BWS (Brokers Workstation)
b) System Software
? Opening system-Unix (HP UX)
? RDBMS (Relation Data Base Management System): Sybase.
Dhaka members can connect their own office through WAN. Dhaka members can connect from their won office through WAN. Sylhet members can connect though LAN.
?Country wide WAN
Network covers Dhaka, Dhaka and Sylhet.
Dhaka-Dhaka is connected through VSAT and Bangladesh T&T leased line as Back-up.
Dhaka-Sylhet is connected via Dhaka, through BT&T leased line & dial-in as back up.
E1 line, High Speed Optical fiber is used in the Network.
3.5 Clearing and Settlement Department:
This is the busiest department in the Dhaka stock exchange. The Functions of this department are conducted by the ‘Settlement of Stock Exchange Transactions Regulations, of DSE Ltd.” The main functions of this department are:
a) Collecting Security deposit
b) Preparation of contract note
c) Informing the Position of Settlement
d) To clear and settle the transactions.
e) Automatic buying in and selling out.
f) Charge fine/interest from the defaulting members
g) Deal with the defective share
h) Spot transaction
i) Sending report to the DSE
3.6 Accounts and Finance Department:
Dhaka stock exchange has a department for working with the accounting and financial aspects. This department consists of expert personnel including F.C.M.A. etc. The main function of this department is to maintain the proper books of account as required by law. The accounts are being prepared according to historical cost convention following generally accepted accounting principles. At the end of financial period, this department prepares Income and Expenditure account, Cash flow statement and also a Balance Sheet for the projected year.
3.7 R&D Library and P.R. Department:
Research & Development are essential pre-requisites for effective functioning and development of any Stock Exchange. Dhaka Stock Exchange has R&D, Library and Public Relations department. This section deals with the functioning of this department.
Research & Development
Research is a foremost necessity for any stock exchange. In order to fulfill the need DSE has established a Research Center and are keeping close contacts with the UN bodies, international research organization, etc. This department has been publishing a monthly bulletin “PORTFOLIO” It was earlier published in the name of “market update” This monthly magazine is being distributed to the concerned persons and agencies including Bangladesh Missions abroad, Foreign Missions in Bangladesh, Stock Exchange-World wide etc. in addition to the transaction data analysis, Portfolio carries in depth analysis, interpretative write-ups on the share markets, investments, capital flow and formation and the state of the economy in general. DSE also envisages publishing fact book, booklets on trading rules, clearing & settlement rules etc.
Dhaka stock exchange has also established a specialized library for the use of the operators of the money market. The country Director of the World Bank Resident Mission in Bangladesh, Mr. Pierre Landell-Mills, officially inaugurated the DSE library. At this library, international newspaper, journals, stock market book & publications, information of listed companies, CD ROM, videocassettes for learning on various management tools and on foreign stock markets etc. is available.
The objectives of setting this library are:
? To enrich the knowledge of investors and brokers,
? To encourage the post-graduate students and teachers to acquire
? About capital market etc.
At present 1000 books are available at this library. These books include Finance, Management, Accounting, Stock Market, Economics, and Statistics etc. Beside these books, half-yearly and annual report of various listed company; World Bank’s publications relating to the economic survey of Bangladesh are also available here. DSE has already opened a Home Page on the Internet (www.DSEbd.com) for releasing updated market information. At this Home page Organizational History of DSE, Rules & Regulations of DSE, Foreign Investor’s incentives, Members’ list, listed company’s information, Daily market Statistics (be updated in every one hour) are available.
The main function of this section is to increase the public awareness by providing various information to the general public through Press News, T.V. coverage, Newspaper etc. Another function is to arrange Seminar and Workshops. DSE has been organizing seminars and workshops at home and abroad for the benefits of the investors. Approximately sixty Seminars and Workshops have been held in the country and twelve seminars and workshops have been held abroad organized for the non-resident Bangladesh in Washington, New York, Mecca, Medina, Jeddah, Dubai, Tehran, and London etc.
Trading System of DSE
The stock market is one kind of capital market where the stocks are of the different companies are traded. DSE, floor trading was started with open cry-out auction system. Now trading has become automated, led by the DSE through the central depository. In the present automated trading environment, bids/offers, depth, and required broker particulars are all recorded and can be retrieved for future reference.
4.2 Types of stock market:
There are two types of stock markets such as,
4.2.1 Primary market of trading system
In primary market the following elements are observed: – Initial public Offer (IPO)
How to apply for IPO
IPO distribution system
Refund warrant / allotment of IPO
Sell / hold
How an NRB apply for IPO
What to know before applying for IPO
All of these are discussed below:
Initial public Offer (IPO): Initial public Offer (IPO) means first offering of security by an issuer to the general public.
Opening process of B/O Account:
Collect B/O Account opening form from a depository participant.
Fill it up, sign it, enclose to recent color pp size photograph and photocopy of nationality certificate / passport and a certificate from the manager of the bank account.
Submit it to the concerned DP along with charges.
The DP will input your data into the online server of CDBL.
CDBL server will automatically produce a 16 digit account number like 1525685464653145
How to apply for IPO
We will get information from newspaper, stock exchanges, broker offices, web sites of SEC, DSE and the issuers, also from DSE publications.
How to apply
Collect IPO application form from DSE or its broker offices Bankers to the issue.
Fill it up, sign it.
Submit the form along with the subscription money to the selected bank.
Collect the banker’s acknowledgement.
Wait for lottery.
IPO distribution system
Any of the three situations may arise
|Under- subscribed||Distributed to the public + under writers (If subscribed by less than 50%, return to the public)|
|Subscribed fully||Distribute as supply|
Refund Warrant /Allotment of IPO:
If your application is successful in the lottery, the issuer shall deposit your shares in your concerned B/O account.
If not successful in the lottery the issuer shall refund your subscription money by account payee Cheque or warrant payable to applicant.
Then you have to deposit the refund warrant to your bank for clearance. Thus your money will be returned. So there is no loss in the IPO.
Sell / Hold:
Check the B/O account and take a statement of holdings.
Now one can sell the shares or hold it.
If you sell it, get capital Gain, if you hold its price may rise and may get dividend or stocks.
The particulars need to know before applying for IPO:
Profitability, cash flow and financial solvency, if available
Estimated profit and cash flow.
Company’s product is technical one
Company’s sponsors have good financial track record and are not loan or tax defaulters.
Share issue price is as per net asset value and present income based value.
Has the company long-term loan from BSB and BSRS?
Any foreign investor’s portfolio in the company.
4.2.2 Secondary market Trading system:
This is well known as stock exchange, is a secondary market – a trading market. It is structured to provide liquidity and marketability to the security industry.
It is a market where you can buy and sell stocks.
We shall discuss here:
How can I start?
What to know before investing?
Places to the complaints
How DSE helps you?
Procedure of secondary market trading:
Contact with a stock broker
Open a client account and a B/O account
Observe first and study the market.
Place your buy / sell order.
Get buy / sell confirmation.
You can hold it or sell it if price increases.
If you hold it you may get cash dividend or stock dividend.
Before starting secondary business we should observed-
Fundamental analysis is the process of looking at a business at the basic or fundamental financial level. This type of analysis examines key ratios of a business to determine its financial health and gives you an idea of the value of its stock.
Many investors use fundamental analysis alone or in combination with other tools to evaluate stock for investment purposes. The goal is to determine the current worth and more importantly, how the market values the stock.
Technical analysis is a method of evaluating stocks by analyzing statistics generated by market activity, past prices and volume. Technical analysis do not attend to major a security’s intrinsic value, instead they look at stock charge for patterns and indicators that will determine a stock’s future performance. Technical analysis has become increasingly popular over the past several years, as more and more people believe that the historical performance of a stock is a strong indication of future performance
4.3 Eligibility of a member for trading:
Becoming the member of DSE Clearing House;
Obtaining Dealership /Brokerage License from SEC;
Not otherwise barred by DSE of SEC.
4.4 Categories of Trading Companies in DSE:
There are some categories of Company’s in DSE:
G- Category Companies
N- Category Companies
Z- Category Companies
A- Category Companies
Companies, which are regular in holding the current annual general meetings and have declared dividend at the rate of ten percent of more in the last English calendar year
B- Category Companies
Companies, which are regular in holding the annual general meetings but have failed to declared dividend at least at the rate of tem percent in the last English calendar year.
Z- Category companies
Companies which failed to hold the current annual general meetings or have failed to declare any dividend or which are not in operation for more than six months or whose accumulated loss after adjustment of revenue reserve, if any, is negative and exceeded its paid-up capital.
G- Category Companies
G- Category Companies are basically Greenfield companies. The companies, which are not, started its operation but call subscribers to invest to their Company. They basically call for capital in primary market.
N- Category Companies
The Company’s, which are already in operation and enters into primary market to collect money, falls into N- Category Companies.
Provided that the chief executive officer of the exchange may bring any other company under this category, if deemed necessary, with the prior written consent from the Commission
4.5 Types of Trading System of DSE:
4.5.1 Cry-Out System:
Before starting on-line trading system, at the Dhaka Stock Exchange, trading was conducted through Cry-out system. Under this system, Members and their Authorized of the Stock Exchange who have license to trade from the Securities & Exchange Commissions would come to the Stock Exchange Floor and participate in trading. But there were a number of shortcomings of this trading system.
Difficulties of Cry-Out System and Need for Automation:
The following difficulties were found in the cry-out system
a) Cry-out floor trading was inept and slows down the process of finalizing deals on the stock exchange floor between the stock dealers.
b) There was a common complaint from the investors that, they didn’t get fair price. They didn’t know what actually happened on the floor. They had to depend on the broker and it was the market for the brokers not for the investors. To get rid of this problem, a new system is required to be developed.
c) Manual Clearing and settlement system is clumsy and slow causing an affliction in stock exchange settlement department and ultimately limiting the trade volume and transactions.
d) Participation in the Stock Market remains restricted within a community residing close to the Stock Exchange building. The business can’t be reached out the common mass.
e) Cry-out system was a noisy manual system; the open floor action was not only messy and tiring for the traders, but also difficult for the Stock Exchange to monitor the transactions as required by the rules and regulations.
f) The manual system was error-phone. Errors were very difficult to detect in the current system.
To get rid of these difficulties, it was very essential at that time to start on-line trading i.e. Screen based trading system. On-line trading is automated by computer application.
4.5.2 Automated Trading System
Globally the developments in information & communication technologies (ICT) have created a new instance in the securities market operations. Stock Exchanges all over the world have realized the potentiality of ICT and inclined to the electronic trading systems. It was understood by DSE that technology would ensure transparency, timeliness and satisfaction in customer service. Considering those DSE introduced Automated Trading System on 10th August 1998.In other words, the trading floor moved right into the member’s office premises where an investor started to place buy/sell orders.
Considering market growth the Automated Trading System was upgraded two times. The recently Upgraded Trading System, started from 21st December, 2008 is capable to handle 1, 50,000 trades per day as well as 3000 Trading work stations
DSE Automated Trading System (HP Nonstop S7804) is running on fault tolerant, high available, scalable and mai