It first incorporated as East Pakistan Stock Exchange Association Ltd in 28 April 1954 and started formal trading in 1956. It was renamed as East Pakistan Stock Exchange Ltd in 23 June 1962. Again renamed as Dacca Stock Exchange Ltd in 13 May 1964. Dhaka Stock Exchange Ltd.
Type Stock Exchange
Location Dhaka, Bangladesh
Owner Dhaka Stock Exchange Limited
Key people Salahuddin Ahmed Khan (CEO)
Currency Taka
No. of listings 671
Market Cap
US$ 15 billion
Volume US$ 1.43 billion
Indexes DSE 20 Index
General Index
Website
http://www.dsebd.org/
STOCK EXCHANGE BUILDING, 9/F MOTIJHEEL C/A, DHAKA BANGLADESH
Phone: 88-02-9564601, 7175703-11, FAX: +88-02-9564727
Email: dse@bol-online.com, Web: http://www.dsebd.org/
History
It first incorporated as East Pakistan Stock Exchange Association Ltd in 28 April 1954 and started formal trading in 1956. It was renamed as East Pakistan Stock Exchange Ltd in 23 June 1962. Again renamed as Dacca Stock Exchange Ltd in 13 May 1964. After the liberation war in 1971 the trading was discontinued for five years. In 1976 trading restarted in Bangladesh. In 16 September 1986 DSE All Share Price Index was started. The formula for calculating DSE all share price index was changed according to IFC in 1 November 1993. The automated trading was initiated in 10 August 1998. In 1 January 2001 DSE 20 Index was started. Central Depository System was initiated in 24 January 2004. As of November 15 2007, the benchmark index of the Dhaka Stock Exchange Ltd. (DSE) crossed 3000 points for the first time, setting another new high at 3013 points.
Formation
Dhaka Stock Exchange Ltd. (DSE) is a public limited company. It is formed and managed under Company Act 1994, Security and Exchange Commission Act 1993, Security and Exchange Commission Regulation 1994, and Security Exchange (Inside Trading) regulation 1994. The issued capital of this company is Tk. 500,000 which is divided up to 250 shares each pricing Tk. 2000. No individual or firm can buy more than one share. According to stock market rule only members can participate in the floor and can buy shares for himself or his clients. At present it has 230 members. Market capitalization of the Dhaka Stock Exchange Ltd. reached nearly $9 billion in September 2007 and $15 billion a year later.
Management
The management and operation of Dhaka Stock Exchange Ltd. is entrusted on a 25 members Board of Director. Among them 12 are elected from DSE members, another 12 are selected from different trade bodies and relevant organizations. The CEO is the 25th ex-officio member of the board. The following organizations are currently holding positions in DSE Board:
• Bangladesh Bank
• ICB
• President of Institute of Chartered Accountants of Bangladesh
• President of Federation of Bangladesh Chambers of Commerce and Industries
• President of Metropolitan Chambers of Commerce and Industries
• Professor of Finance Department of Dhaka University
• President of DCCI (Dhaka Chamber of Commerce and Industry)
Introduction to DSE
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 Favour 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 Chittagong. 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 As 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. 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 stoods 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.
Legal Control
The Dhaka Stock Exchange Ltd. (DSE) is registered as a Public Limited Company and its activities are regulated by its Articles of Association rules & regulations and bye-laws along with the Securities and Exchange Ordinance, 1969, Companies Act 1994 & Securities & Exchange Commission Act, 1993.
Function of DSE
The major functions are:
Listing of Companies (As per Listing Regulations).
Providing the screen based automated trading of listed Securities.
Settlement of trading (As per Settlement of Transaction Regulations)
Gifting of share / granting approval to the transaction/transfer of share outside the trading system of the exchange (As per Listing Regulations 42)
Market Administration & Control.
Market Surveillance.
Publication of Monthly Review.
Monitoring the activities of listed companies. (As per Listing Regulations).
Investors grievance Cell (Disposal of complaint bye laws 1997).
Investors Protection Fund (As per investor protection fund Regulations 1999)
Announcement of Price sensitive or other information about listed companies through online.
Algorithm of DSE Indices
Index Calculation Algorithm (according to IOSCO Index Methodology):
Yesterday’s Closing Index X Current M.Cap
Current Index = ————————————————————–
Opening M.Cap
Yesterday’s Closing Index X Closing M.Cap
Closing Index = ————————————————————–
Opening M.Cap
Current M.Cap = ? ( LTP X Total no. of indexed shares )
Closing M.Cap = ? ( CP X Total no. of indexed shares )
There are three indices in the DSE as follows :
Sl.No Index Name Base Index Remarks
1 DSI (all shares) 350 (as on 01-11-1993)
2 DGEN
(A, B, G & N) 817.63704 (as on 24-11-2001) SEC directive regarding index was on 17-11-2001
3 DS20 1000 (as on 01-01-2001)
Abbreviations and Acronyms
M.Cap – Market Capitalization
DSE – Dhaka Stock Exchange Ltd.
IOSCO – International Organization of Securities Exchange Commissions (IOSCO)
LTP – Last Traded Price
CP – Closing Price
DSE Clearing & Settlement Process
The Clearing and Settlement module provides the management of trade from the point of entry into the Settlement Pool trade database until it has been delivered, settled and removed from the Settlement Pool. It consists of three major business processes.
Clearing: participant trade reporting, affirmation, billing and assigning settlement instructions.
Settlement: the process of overseeing that delivery of all instruments to the buyer and payment of all moneys to the seller has occurred before removing the trade from the settlement pool.
Regulation 4 of the Settlement of Stock Exchange Transactions Regulation 1998 has been given effect time to time. A new directive was made by SEC dated on 18th March 2003 “Adjusted due position mechanism for settlement of scrip only as provided by regulation 4(1) of settlement of Stock Exchange Transaction Regulations, 1998 shall remain suspended from 19th March 2003 until further order”.
Here is a complete picture of the settlement system for all of our 378 Instruments in Five (5) groups in the Four (4) markets.
A Group: Number of Instruments are 164 (142 + 8D + 14M), Here D for Debentures, M for Mutual funds & TB for Treasury Bonds (Trading in Public, Block & Odd-lot Market with trade for trade settlement facility for scrip only through DSE Clearing House on T+1, T+3 basis). “A” and “DA” are marked in BASES columns for Non-Demat & Demat instrument respectively in our TESA Trading Software.
The above cycle is valid for A, B, G & N category instruments traded in Public, Block & Odd-lot market.
B Group: Number of Instruments are 18 (Trading in Public, Block & Odd-lot Market with trade for trade settlement facility through DSE Clearing House on T+1, T+3 basis). “B” and “DB” are marked in BASES columns for Non-Demat & Demat instrument respectively in our TESA Trading software.
G Group: Number of Instrument is 1 (Trading in Public, Block & Odd-lot Market with trade for trade settlement facility through DSE Clearing House on T+1, T+3 basis). “G” and “DG” are marked in BASES columns for Non-Demat & Demat instrument respectively in our TESA Trading software.
N Group: Number of Instrument is 14 (Trading in Public, Block & Odd-lot Market with trade for trade settlement facility through DSE Clearing House on T+1, T+3 basis). “N” and “DN” are marked in BASES columns for Non-Demat & Demat instrument respectively in our TESA Trading software.
Z Group: Number of Instruments are 97(Trading in Public, Block & Odd-lot Market with trade for trade settlement facility through DSE Clearing House on T+3, T+7 basis). “Z” and “DZ” are marked in BASES columns for Non-Demat & Demat instrument respectively in our TESA Trading software.
This cycle is valid only for Z group instruments traded in Public, Block & Odd-lot market.
Instruments Of All Groups Traded In Spot Market:
The above cycle is valid for A, B, G, N & Z category instruments traded in spot market.
Instruments Of Foreign Trades (DVP) Of All Groups:
The above cycle is valid for A, B, G, N & Z category instruments of Foreign trade.
Remarks:
* If any instrument declared as Compulsory Spot then Trades of Block and Odd-lot market of that Instrument will be settled like Spot Market.
* Howla Charge, Laga Charge & Tax are always payable to DSE at Pay-In date for both Buyer and Seller traded in Public, Block & Odd-lot Market.
* Howla Charge, Laga Charge & Tax are always payable to DSE at T+1 day for both Buyer and Seller traded in Spot Market.
* Outside-Of-Netted settlement for “A” Group instrument has been withdrawn from 10th Dec 2006.
* DVP Trades are Off-Market Settlement (Broker to Broker).
SETTLEMENT FOR DIFFERENT CATEGORIES INSTRUMENTS
01) For A group Instruments:
Market name Trade for Trade System Settlement & Settlement Period
Public Trade for Trade * T+1 & T+3
Odd + Block Trade for Trade T+1 & T+3
Spot Trade for Trade T+0 & T+1
02) For B group Instruments:
Market name Trade for Trade System Settlement & Settlement Period
Public Trade for Trade * T+1 & T+3
Odd + Block Trade for Trade T+1 & T+3
Spot (Before Book-closer) Trade for Trade T+0 & T+1
03) For G group Instruments:
Market name Trade for Trade System Settlement & Settlement Period
Public Trade for Trade * T+1 & T+3
Odd + Block Trade for Trade T+1 & T+3
Spot (Before Book-closer) Trade for Trade T+0 & T+1
04) For N group Instruments:
Market name Trade for Trade System Settlement & Settlement Period
Public Trade for Trade * T+1 & T+3
Odd + Block Trade for Trade T+1 & T+3
Spot (Before Book-closer) Trade for Trade T+0 & T+1
* As netting system for shares has withdrawn, for A, B, G & N group instrument, member will have to deposit the full shares at the DSE on T+1 after selling the shares, In case of purchasing such shares, the buyer will have to deposit the Balanced (Netted) money traded in Public, Block & Odd-lot market at the DSE on T+1.
05) For Z group Instruments:
Market name Trade for Trade System Settlement & Settlement Period
Public Trade for Trade * T+3 & T+7
Odd + Block Trade for Trade T+3 & T+7
Spot (Before Book-closer) Trade for Trade T+0 & T+1
** Under the Trade for trade settlement system, member will have to deposit the full money at the DSE on T+3 after purchasing the shares, In case of selling such shares, the seller will have to deposit the full shares at the DSE on T+3.
DEMATE SHARE:
All selling shares have to transfer (Pay in) to the clearing account of selling Brokers from concerned BO account within settlement period. Regarding the cash payment the procedure will remain unchanged as mentioned above.
DSE Automated Trading System
• Preamble
• TESA Functional Model
• Hardware
• TESA’s principal trading functions
• Network (LAN / WAN)
• Markets
• System Software
• Trading Sessions
• Application Software
• Market Control
• TESA Architecture
• Market Information
• Solution Benefits
• Broker Support
PREAMBLE:
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.
HARDWARE:
DSE Automated Trading System (HP S7804) is running on fault tolerant, high available, scalable and maintainable Mainframe Server. Previously DSE established the TANDEM K204 System on September 1998 and on August 2005 it was replaced with highly scaleable HP S7802.
DSE upgraded the Trading System again on 21st December, 2008. The existing HP S7804 Server is highly fault tolerant to the fact that no single component failure will halt the system. Its constituent parts are hot swappable, and upward compatible; components can be added or removed while the system is running and any compatible new upgraded will work with the system.
All disk drives are mirrored so, if any of the disk crashes the exact copy of the data is available at online. Moreover the connecting path for every disk whether it is primary or mirror is also redundant. In every case, minimum two peripheral devices exist. All the components are working active – active load balancing procedure. To ensure better power quality we have ensured high end UPS’s with long durable backup capability, two instant backup generations and other electrical devices.
NETWORK (LAN / WAN)
The entire Member (230 members) Server Applications (MSA) are connected with HP S-Series Server through either DSE LAN or WAN connectivity. Each member has one or more Trader Work Station (TWS). The TWSs are being connected to the Trading Server via respective MSA through LAN and WAN connection.
DSE outsourced Metro Net Ltd., DNS Ltd. , X-Net Ltd., Dhaka Com Ltd., Ranks ITT, Link-3, Royal Green Online Ltd. etc Network Service Providers (NSP under WAN Expansion Project.
Now days members can establish a main office or branch offices to their remote location and can trade smoothly by using different media ADSL, Optical fiber and Radio Link from Dhaka and other important cities such as Gazipur, Narayanganj, Comilla, Hobiganj, Chittagong, Sylhet, Khulna, Barisal, Rajshahi, Bogra at the same time.
Two DSE branch offices located at Chittagong and Sylhet is connected via BTTB’s DDN link. We also used connectivity for redundancy for the DDN link. We have a plan to reach the DSE branches in same way.
DSE LAN/WAN Expansion DSE LAN/WAN Expansion
Within Dhaka City: Outside of Dhaka City:
In case of trade interruption due to serious hardware, software, network failure or telecommunication disruption at the Brokerage houses, there is a provision to allow traders to trade at DSE Contingency Trading floor.
SYSTEM SOFTWARE
The system software is HP Proprietary KERNEL and includes the database as part of the operating system thereby eliminating the layer typically found in most Database Management Systems (DBMS). The Database functionalities are handled by SQL, which is simply a different operational session for the operating system. The proprietary nature of the system software arguably enhances system security.
Operating system is HP’s proprietary Kernel
DBMS handled by SQL.
The system software treats all its hardware resources as objects and is thus entirely message driven. This then allows application software to be deployed using client / server architecture providing shared data processing between the central server and the user workstation. The central trading system resides in the Stock Exchange premises, which is running 24 hrs in a day & 365 days in a year.
APPLICATION SOFTWARE
The application, which runs in DSE for trading, is called TESA (The Electronic Securities Architecture). TESA has two parts: MSA (Member’s Server Application) & TWS (Trader workstation). MSA is the “Gateway” between the traders and the Stock Exchange, which manages all the transactions and database operations between the traders and the Trading Engine. TWS is the Front-end Application closer to investors, where they can submit Buy/Sell orders for their desired securities.
TESA (The Electronics Securities Architecture) is the Trading software (Based on HP proprietary O/S & DBMS)
It has developed in view of Distributed Database system
In the client site it is being using SQL as local Database
Trading Software is MSA & TWS
In STSD (Signal trader Single Database) system both MSA & TWS are running on a Windows 2k Professional /XP Professional workstation and for MTSD (Multiple trader Single Database) MSA install in a Windows 2k Server & the TWSs are in different Windows 2k Professional /XP Professional workstation-using members in house LAN
TESA ARCHITECTURE
TESA software is built for the global securities markets. It uses fault tolerant computers, intelligent workstations and client / server design techniques. This provides co-operative processing, high message integrity, continuous operation and fully automatic recovery. This co-operative mechanism enables very high speed processing which is essential for today’s electronic markets.
TESA’s Application Programmatic Interface (API) is the gateway to the TESA system from the outside world. All external devices connect through the API. The API provides the translation between external devices and internal processes. This means that a new process does not need to be written to support each new device, only the API needs to be modified.
SOLUTION BENEFITS
The TESA application suite derives significant advantages from being implemented on the HP platform. The HP customers have benefited from these advantages.
Fault Tolerance: One of the most important automation requirements for any stock exchange system is continuous system availability. With most systems Fault Tolerance is created at the application level. Fault Tolerance is a fundamental design feature of the HP architecture.
Data Integrity: Data integrity is an integral feature of HP architecture. TESA employs standard HP tools to achieve exceptional data integrity.
Scalability: The ability of an exchange to accommodate extraordinary increases in transaction volumes without loss of its Capital investment in automation is very important. The HP Server is massively scalable due to Parallel processors.
TESA FUNCTIONAL MODEL
An overview of the TESA Functional Model
Client / Server: TESA’s Client / Server architecture enables an efficient allocation of computing resources and provides easily modified user-friendly interfaces. TESA workstations operate under Windows 95 and can function either as servers on a broker’s network or as workstation. These are used to perform trading and settlement activity by the brokers.
PRINCIPAL FUNCTIONS OF TESA
Market Information: Supplying all market information needed to formulate the buy and sell decisions.
Order Management: Accept, validate and store orders and quotes from broker workstations and or systems.
Order Execution : Automatically executes orders when buy and sell prices match.
Trade Reporting : Trade execution reports are provided to each trade participant, to the settlement system and / or the depository and to the market.
Index Calculation : Calculates and publishes market indices (DSE General Index & Weighted Average Index.)
Market Access : Provide exchange members with efficient affordable GUI-based tools for accessing the market.
MARKETS
Four types of market at DSE
Public Market : In this market instruments are traded in normal volume
Spot Market : Instruments are traded in normal volumes under corporate action if any
Odd lot Market : Odd lots of all Instruments are trade in this market
Block Market : Instruments are traded in bulk volume
TRADING SESSIONS
TESA conducts trading in-5-phases.
Enquiry: In this session Brokers can logon to the system. No order will be submitted in this session. No trade will be executed. Only previous orders can be withdrew in this session
Opening: The Opening is a pure, single-price auction. All buy and all sell orders are compared and calculate the open-adjust price. No trades will be executed in this session
Continuous Trading: During this phase, participants enter orders and immediate execution or for inclusion in the book. Automatic matching and execution takes place based on best price/ first in, first out trading rules
Closing: Closing prices are calculated and disseminated to market participants
Enquiry : Market will be closed in this session & other facilities like the previous enquiry session.
MARKET CONTROL
The Market Control Workstation allows the exchange administrative staff to control the operation of the market, e.g.
Session Control: Opening and closing the market via interactive control or by preset timers.
Validation Parameters: Setting and viewing parameters that control the trading engine validation e.g. tick size, Circuit Breaker, Circuit Filter, Market lot, Price protection Percentage.
Messaging: Allows the dissemination of company announcement data and general market administrative massages.
MARKET INFORMATION
Market Information is a real-time market data system. It collects, manages, generates and stores information relating to trade instruments and issuing companies. Market Information is responsible for,
Collecting Real-Time Market Information:
Bids, offers, last sale (i.e. most recent trade price and volume), book and other data are gathered via the Trading engine. It supports TESA’s automated and manual trading modules and can process the trades of external and off-market systems.
Collecting company Information:
All information supplied by the listed companies are maintained in the TESA database.
Generating Market Statistics:
TESA generates market indices on a real time basis. It generates other statistical information such as Price.
BROKER SUPPORT
Research and Enquiry:
This module provides brokers access to the local Broker Support and TESA databases for enquiries and research purposes.
Public Order Book
Broker Order Book
The multi-windows environment allows users to simultaneously view orders, market and trades. Broker Support offers Stock Exchange members two configurations; standalone and multi-user. Both configurations maintain a database consisting of information generated by the TESA Server and the local system.
Surveillance at DSE
The main objective of the Surveillance function of the Exchange is to promote market integrity in two ways –
• By monitoring price and volume movements (volatility) as well as by detecting potential market abuses at a nascent stage, with a view to minimizing the ability of the market participants to influence the price of the scrip/scrips in the absence of any meaningful information.
• By managing default risk by taking necessary actions timely.
Market Abuse is a broad term which includes abnormal price/volume movement, artificial transactions, false or misleading impressions, insider trading, etc. In order to detect aberrant behavior/ movement, it is necessary to know the normal market behavior –
The department carries out investigation, if necessary, based on the preliminary examination/analysis and suitable actions are taken against members involved based on the investigation.
All the instruments traded in the market come under the Surveillance umbrella of DSE.
Surveillance activities at the Exchange are divided broadly into two major segments –
• Price Monitoring: Price monitoring is manly related to the price movement/ abnormal fluctuation in prices or volumes etc.
• Position Monitoring: The position monitoring relates mainly to abnormal positions of members, etc. in order to manage default risk.
Price Monitoring
The functioning of the Price Monitoring is broadly divided into following activities –
On line Surveillance
One of the most important tools of the Surveillance is the On-line Real Time Surveillance system with main objectives of detecting potential market abuses at a nascent stage to reduce the ability of the market participants to unduly influence the price and volumes of the scrips traded at the Exchange, improve the risk management system and strengthen the self regulatory mechanism at the Exchange. The system provides facility to access trades and orders of members.
Off-Line Surveillance
The Off-Line Surveillance system comprises of the various reports based on different parameters and scrutiny thereof –
• High/ Low Difference in prices
• % change in prices over a week/ fortnight/ month
• Top N scrips by Turnover over a week/ fortnight/ month
• Top N scrips by Volume over a week/ fortnight/ month
• Trading in infrequently traded scrips
• Scrips hitting New High / Low etc.
The Surveillance actions or investigations are initiated in the scrips identified from the above-stated reports.
Investigations
Conducting in-depth investigations based on preliminary enquiries/analysis made into trading of the scrip. In case of irregularities observed, necessary actions are initiated or investigation case forwarded to SEC, if necessary through the CEO.
Surveillance Actions
• Warning to Members
The department may issue verbal/ written warning to member/s when market irregularities in the scrip are suspected.
• Imposition of penalty/ suspension
The department, through the CEO, imposes penalty or suspend the member/s who are involved in market irregularities, based on the input/ evidence available from investigation report.
Rumor verification
• Liaising with Compliance Officers of companies to obtain comments of the company on various price sensitive corporate news items appearing in selected News Papers.
• Comments received from the companies are disseminated to the market by way of online news bulletin.
• Investigations based on rumor verifications are carried out, if required, to detect cases of suspected insider trading.
Position Monitoring
The Surveillance Department closely monitors outstanding exposure of members on a daily basis. For this purpose, it observes various off-line and on-line market monitoring reports. The reports are scrutinized to ascertain whether there is excessive purchase or sale position build up compared to the normal business of the member, whether there are concentrated purchases or sales, whether the purchases have been made by inactive or financially weak members and even the quality of scrips is considered to assess the quality of exposure.
The following key areas are examined to assess the market risk involved –
Online monitoring of Brokers Position
Surveillance closely monitors brokers gross turnover exposure for ensuring margin calls in time.
B/S Statement of Trading Members
Scrutinizing the statement on daily basis. It is for keeping a watch on the exposure of the members & ascertains the quality of exposures.
A detailed report on the net outstanding positions of top purchasers and top sellers in individual scrip is prepared, if considered necessary.
Concentrated B/S
It is considered a risky issue. In case, such a situation is noticed, fundamentals of the scrips, their daily turnover, and their nature of transactions are ascertained. Thereafter, based on the market risk perception appropriate surveillance actions are taken.
B/S of scrips having thin trading
It is closely scrutinized as comparatively high market risk is involved in trading in such scrips. Details of trades in such scrips, if necessary, are called from members to assess the market risk involved & decide on the appropriate surveillance action.
Verification of Institutional Trade
The institutional trades executed by the trading members are verified to ascertain the genuineness of trades.
Verification of Foreign Trade
The foreign trades executed by the trading members are verified to ascertain the genuineness of trades.
Verification of Cross Reporting Trade
The report crossing trades executed by the trading members are verified to ascertain the genuineness of trades.
Verification of Dealers own trades
Trades executed by the trading members (Dealers) are verified to ascertain the genuineness of trades.
Verification of Sponsor’s Trade
The Sponsors trades executed by the trading members are verified to ascertain the genuineness of trades.
Snap Investigation
To carry out, wherever considered necessary, preliminary investigation of certain dealings to verify irregularities. Further actions, viz., referring the case for detailed investigation, referring the case to the Sec, depending on the findings of preliminary investigation.
Market Intelligence
The rumors floating in the market are verified with the data available with DSE,Newspapers, Television news channels & Reuters to ascertain the national & global factors affecting the market sentiments. This enables the Exchange to avert market problems before it causes a serious damage.
Review Block Trades
To determine –
• Whether the block was executed at a price, even if at a discount or premium which was in line with other trading of the stock.
• Whether there was any news on the company which caused the price increase or decrease subsequent to the block transaction.
Review List of Settlement Failures: To identify –
• broker/s with frequent failures
• A particular stock with a pattern.
Verify Company Accounts
To scrutinize company announcements, company reports, auditors qualifications & other notes of special interests in the published accounts of such company.
Review Media Information
To scrutinize press articles or other media on the daily basis, the news relevant to the share prices of companies.
Monitoring on Newly Listed Stock
To review all activities of a newly listed stock for the first 1 / 2 weeks to identify any abnormal deal.
Develop Good Liaison
To develop & maintain good liaison with staff members of SEC & listed companies & member firms as well.
Develop market contacts & to pick up Intelligence.
Trading Sessions:
TESA conducts trading in-4-phases.
Enquiry: In this session Brokers can logon to the system. No order will be submitted in this session. No trade will be executed. Only previous orders can be withdrew in this session
Opening: The Opening is a pure, single-price auction. All buy and all sell orders are compared and calculate the open-adjust price. No trades will be executed in this session
Continuous Trading: During this phase, participants enter orders and immediate execution or for inclusion in the book. Automatic matching and execution takes place based on best price/ first in, first out trading rules
Enquiry: Closing prices are calculated and disseminated to market participant. Market will be closed in this session & other facilities like the previous enquiry session.
Corporate Governance Guidelines
SECURITIES AND EXCHANGE COMMISSION
Jiban Bima Tower
10, Dilkusha (15th, 16th and 20th Floor)
Dhaka-1000
NOTIFICATION
Dated the 20th February, 2006
No. SEC/CMRRCD/2006-158/Admin/02-08: Whereas, the Securities and Exchange Commission (herein after referred to as the “Commission’) deems it fit that the consent already accorded by the Commission, or deemed to have been accorded by it, or to be accorded by it in future, to the issue of capital by the companies listed with any stock exchange in Bangladesh, should be subject to certain further conditions, on ‘comply or explain’ basis, in order to enhance corporate governance in the interest of investors and the capital market;
Now, therefore, in exercise of the power conferred by section 2CC of the Securities and Exchange Ordinance, 1969 (XVII of 1969), the Commission hereby supersedes its earlier Order No. SEC/CMRRCD/2006-158/Admin/02-06 dated the 9th January, 2006 and imposes the following further conditions to the consent already accorded by it, or deemed to have been accorded by it, or to be accorded by it in future, to the issue of capital by the companies listed with any stock exchange in Bangladesh:
Provided, however, that these conditions are imposed on ‘comply or explain’basis. The companies listed with any stock exchange in Bangladesh should comply with these conditions or shall explain the reasons for non-compliance in accordance with the condition No.5.
The Conditions:
1.00 BOARD OF DIRECTORS:
1.1. Board’s Size
The number of the board members of the company should not be less than 5 (five) and more than 20 (twenty):
Provided, however, that in the case of banks and non-bank financial institutions, insurance companies and statutory bodies for which separate primary regulators like Bangladesh Bank, Department of Insurance etc. exist, the Board of those companies should be constituted as may be prescribed by such primary regulators in so far as those prescriptions are not inconsistent with the aforesaid condition.
1.2. Independent Directors
All companies should encourage effective representation of independent directors on their Board of Directors so that the Board, as a group, includes core competencies considered relevant in the context of each company. For this purpose, the companies should comply with the following:-
(i) At least one tenth (1/10) of the total number of the company’s board of directors, subject to a minimum of one, should be independent directors.
Explanation: For the purpose of this clause “independent directo” means a director who does not hold any share in the company or who holds less than one percent (1%) shares of the total paid-up shares of the company, who is not connected with the company’s promoters or directors or shareholder who holds one percent (1%) or more than one percent (1%) shares of the total paid-up shares of the company on the basis of family relationship; who does not have any other relationship, whether pecuniary or otherwise, with the company or its subsidiary/associated companies, who is not a member, director or officer of any stock exchange, and who is not a shareholder, director or officer of any member of stock exchange or an intermediary of the capital market.
(ii) The independent director(s) should be appointed by the elected directors.
1.3. Chairman of the Board and Chief Executive
The positions of the Chairman of the Board and the Chief Executive Officer of the companies should preferably be filled by different individuals. The Chairman of the company should be elected from among the directors of the company. The Board of Directors should clearly define respective roles and responsibilities of the Chairman and the Chief Executive Officer.
1.4.
The Director’s Report to Shareholders
The directors of the companies should include following additional statements in the Directors’ Report prepared under section 184 of the Companies Act, 1994:-
(a) The financial statements prepared by the management of the issuer company present fairly its state of affairs, the result of its operations, cash flows and changes in equity.
(b) Proper books of account of the issuer company have been maintained.
(c) Appropriate accounting policies have been consistently applied in preparation of the financial statements and that the accounting estimates are based on reasonable and prudent judgment.
(d) International Accounting Standards, as applicable in Bangladesh, have been followed in preparation of the financial statements and any departure therefrom has been adequately disclosed.
(e) The system of internal control is sound in design and has been effectively implemented and monitored.
(f) There are no significant doubts upon the issuer company’s ability to continue as a going concern. If the issuer company is not considered to be a going concern, the fact along with reasons thereof should be disclosed.
(g) Significant deviations from last year in operating results of the issuer company should be highlighted and reasons thereof should be explained.
(h) Key operating and financial data of at least preceding three years should be summarized.
(i) If the issuer company has not declared dividend (cash or stock) for the year, the reasons thereof should be given.
(j) The number of Board meetings held during the year and attendance by each director should be disclosed.
(k) The pattern of shareholding should be reported to disclose the aggregate number of shares (along with name wise details where stated below) held by:-
(i) Parent/Subsidiary/Associated companies and other related parties (name wise details);
(ii) Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer, Head of Internal Audit and their spouses and minor children (name wise details);
(iii) Executives; and
(iv) Shareholders holding ten percent (10%) or more voting interest in the company (name wise details).
Explanation: For the purpose of this clause, the expression “executive” means top five salaried employees of the company, other than the Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer and Head of Internal Audit.
2.00 CHIEF FINANCIAL OFFICER (CFO), HEAD OF INTERNAL AUDIT, AND COMPANY SECRETARY
2.1 Appointment
The company should appoint a Chief Financial Officer (CFO), a Head of Internal Audit and a Company Secretary. The Board of Directors should clearly define respective roles, responsibilities and duties of the CFO, the Head of Internal Audit and the Company Secretary.
2.2 Requirement to Attend Board Meetings
The CFO and the Company Secretary of the companies should attend meetings of the Board of Directors, provided that the CFO and/or the Company Secretary should not attend such part of a meeting of the Board of Directors which involves consideration of an agenda item relating to the CFO and/or the Company Secretary.
3.00 AUDIT COMMITTEE:
The company should have an Audit Committee as a sub-committee of the Board of Directors.
The Audit Committee should assist the Board of Directors in ensuring that the financial statements reflect true and fair view of the state of affairs of the company and in ensuring a good monitoring system within the business.
The Audit Committee shall be responsible to the Board of Directors. The duties of the Audit Committee should be clearly set forth in writing.
3.1 Constitution of Audit Committee
(i) The Audit Committee should be composed of at least 3 (three) members.
(ii) The Board of Directors should appoint members of the Audit Committee who should be directors of the company and should include at least one independent director.
(iii) When the term of service of the Committee members expires or there is any circumstance causing any Committee member to be unable to hold office until expiration of the term of service, thus making the number of the Committee members to be lower than the prescribed number of 3 (three) persons, the Board of Directors should appoint the new Committee member(s) to fill up the vacancy(ies) immediately or not later than 1 (one) month from the date of vacancy(ies) in the Committee to ensure continuity of the performance of work of the Audit Committee.
3.2 Chairman of the Audit Committee
(i) The Board of Directors should select 1 (one) member of the Audit Committee to be Chairman of the Audit Committee.
(ii) The Chairman of the audit committee should have a professional qualification or knowledge, understanding and experience in accounting or finance.
3.3 Reporting of the Audit Committee
3.3.1 Reporting to the Board of Directors
(i) The Audit Committee should report on its activities to the Board of Directors.
(ii) The Audit Committee should immediately report to the Board of Directors on the following findings, if any:-
(a)Report on conflicts of interests;
(b) Suspected or presumed fraud or irregularity or material defect in the internal control system;
(c) Suspected infringement of laws, including securities related laws, rules and regulations; and
(d) Any other matter which should be disclosed to the Board of Directors immediately.
3.3.2 Reporting to the Authorities
If the Audit Committee has reported to the Board of Directors about anything which has material impact on the financial condition and results of operation and has discussed with the Board of Directors and the management that any rectification is necessary and if the Audit Committee finds that such rectification has been unreasonably ignored, the Audit Committee should report such finding to the Commission, upon reporting of such matters to the Board of Directors for three times or completion of a period of 9 (nine) months from the date of first reporting to the Board of Directors, whichever is earlier.
3.4 Reporting to the Shareholders and General Investors
Report on activities carried out by the Audit Committee, including any report made to the Board of Directors under condition 3.3.1 (ii) above during the year, should be signed by the Chairman of the Audit Committee and disclosed in the annual report of the issuer company.
4.00 EXTERNAL / STATUTORY AUDITORS
The issuer company should not engage its external/statutory auditors to perform the following services of the company; namely:-
(i) Appraisal or valuation services or fairness opinions;
(ii) Financial information systems design and implementation;
(iii) Book-keeping or other services related to the accounting records or financial statements;
(iv) Broker-dealer services;
(v) Actuarial services;
(vi) Internal audit services; and
(vii) Any other service that the Audit Committee determines.
5.00 REPORTING THE COMPLI ANCE IN THE DIRECTOR’S REPORT
The directors of the company shall state, in accordance with the annexure attached, in the directors’ report whether the company has complied with these conditions.
Status of compliance with the conditions imposed by the Commission’s Notification No. SEC/CMRRCD/2006-158/Admin/02-08 dated 20th February,2006issued under section 2CC of the Securities and Exchange Ordinance, 1969:
(Report Under Condition No 5.00)
Procedure for Making Portfolio Investment by Foreign Investors.
Foreigner investors and the Non Resident Bangladeshis (NRBs) can make investment into our securities market from any corner of the world. To exercise the investment as NRBs/foreigners, one must enter into an agreement with a brokerage house of their choice along with anyone of the following institutions:
• Authorized Dealer of Foreign Exchange
• Custodian Bank
• Merchant Bank (Portfolio Manager)
All NRBs/foreigners for the purpose of making investment in our market have to have a Beneficiary Owners (BO) account and a client account opened with any of the brokerage house as well as entering into agreement with the Authorized Dealer or Custodian Bank or Portfolio Manager and thus maintain the investment activities from abroad. List of Brokers together with regular market scenario, fundamental status of the companies listed on the Exchanges and many other relevant necessary information would be available at the website of DSE (www.dsebd.org). List of Brokers of the Exchanges, Merchant Bankers or Custodian Banks would be available at the web page of SEC (www.secbd.org).
Opportunity for Foreign Investors
Bangladesh has adopted a very liberal industrial policy to attract foreign investment
– No limitations pertaining to equity participation i.e. up to 100 percent foreign private investment allowed.
– Except five reserve sectors, all industries are open for private investment. Industries earmarked for public sector investment are in the reserve sector namely:
(i) arms, ammunition and other defence equipment and machinery
(ii) Production of nuclear energy,
(iii) Forest plantation and mechanized extraction within the bounds of reserved forests,
(iv) Security printing (currency notes ) & minting and,
(v) Railways & air transportation (except certain domestic routes and air cargo)
– No permission of the government required to set up new industries.
– For obtaining industries facilities like procurement of land, electricity, gas and sewerage connection, importation of capital machinery and raw materials tax rebate, duty drawback facilities etc. industries need only to be registered with the board of investment (BOI) in a simple prescribed from.
Facilities for Non-Resident Bangladeshis
• Non-resident Bangladesh investors enjoy facilities similar to foreign investors
• Allowed to buy newly issued shares/debentures of Bangladeshi companies
• 10 percent reserved quota for non-resident Bangladeshis in primary shares (IPO)
• Foreign currency deposits in the Non-resident Foreign Currency (NFCD) account
Investment Guarantee
• Foreign Private Investment (Promotion & Protection) Act1980 ensures legal protection to foreign investment in Bangladesh against nationalization and expropriation.
• It also guarantees repatriation of capital and dividend and equitable treatment with local investors.
• Adequate protection is available for intellectual property rights, such as patents, designs & trademarks and copyrights.
FACILITIES AND INCENTIVES
• Tax holiday 5-10 years depending on location of Industries.
• 15 years tax holiday for private power generation companies.
• Facilities for repatriation of invested capital, profit & dividend.
• Exemption of tax on interest on foreign loan.
• Tax exemption on royalties, technical know- how & technical assistance fees.
• Avoidance of double taxation on the basis of bilateral agreements.
• Six month multiple
About DSE Training Academy
DSE Training Academy (DTA) has started its journey since September 10, 2007 inaugurated by the then Finance and Planning Adviser Dr. A.B Mirza Md. Azizul Islam. The core mission of DSE Training Academy is Human Resource Development in the field of Capital Market. The Academy is located at DSE Annex Building-2, 158-160 Modhumita Building 8th (Floor), Motijheel C/A, Dhaka-1000.
DTA presently has arrangement of a 54 – seated Training Hall equipped with all modern facilities and setup. Since the volume of training affairs have been increasing manifold, the DTA is planned to be shifted to a new premise with a capacity of 2,500 sft. area where it will have TFT Monitor and Linux Virus Free Operating Platform with additional modern facilities of two different class rooms with adequate sitting capacity together with a computer lab, reference library, a prayer room and a dining hall. Classroom of the Academy is equipped with modern electronic tools such as overhead projector, multimedia projector, and high-speed computer system with UPS and sound system.
DSE Training Academy has faculties and the speakers drawn from the Industry, a rich pool of professionals, practitioners and eminent personalities, who mix the theory with practical aspects through which participants gets hands on knowledge of the market.
Objectives
• To educate and develop professionals for the securities industry in Bangladesh.
• To function as a center for creating investor awareness through research and training
• To contribute to the orderly and healthy development of Capital Market by bringing
expertise to bear on structural and policy issues concerning the securities industry.
• To disseminate information about Local and International Capital Market by creating a
comprehensive body of knowledge.
• To offer training programs required for the registration of target groups of Capital
Market professionals.
• To offer intermediate-level and advanced training for the stakeholders of Capital
Market.
• To offer compliance and governance related training to Issuer firms.
• To offer training for DSE Officials on skill development.
• To review, revise and update qualification programs to make sure that they are of the
highest quality both in terms of content and delivery methods and meet market needs.
• To establish a comprehensive database of instructors and participants.
• To create alliances with international educational and regulatory institutions.
• To develop and deliver quantitative high-quality short courses based on industry and
regulatory needs.
Mission statement
• To disseminate knowledge to the Capital Markets professionals, thereby raising overall proficiency standards in the industry, this will contribute to the efficiency, effectiveness, and safety of the Market.
• To develop and deepen the pool of qualified professionals available in the Capital market.
Vision
• To cultivate highly proficient, knowledgeable and competent securities professionals
who will contribute to the growth, efficiency and fairness of the Capital Market.
• To be a high-caliber, highly respected Capital Markets training provider, which is
responsive to market needs and attracts both the National and Regional securities
professionals.
• To gain recognition and respect of the industry; locally, regionally and internationally.
DSE at a Glance
Incorporated as East Pakistan Stock Exchange Association Ltd.: 28th April 1954
Start of Formal Trading: 1956
Renamed as East Pakistan Stock Exchange Ltd.: 23rd June 1962
Renamed as Dacca Stock Exchange Ltd.: 13th May 1964
Trading Suspended under new State Policy: 16th December 1971
Trading Resumed in Bangladesh: 16 August 1976
Starting Of All Share price Index calculation: 16th September 1986
Share price Indices calculation on basis of IFC Designed formula: 1st November 1993
Starting of Automated trading: 10th August 1998
Starting Of DSE-20 Index calculation: January 2001
Starting Of DSE General Index calculation: 27th November 2001
Start of CDS through CDBL: 24th January 2004
DSE All share price Index (DSI) Re introduced: 28th March 2005
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Summary
We have tried to find out the scenario of portfolio management in our business sector through my assignment on “Dhaka Stock Exchange Limited”. specially focus on the functional area of Dhaka Stock Exchange that is how DSE operates within its legal framework, Clearing & Settlement Process of DSE, Automated Trading System of DSE and their management and administration.
This assignment will help to understand portfolio management as well as technological application in this area of business analysis and core competence for business success in this competitive market.
Conclusion
Dhaka Stock Exchange Ltd. is the essential part of our financial market which helps us to understand portfolio management and its importance in the business sector. Knowledge of portfolio management is very essential for the Capital Markets professionals, thereby raising overall proficiency standards in the industry, which will contribute to the efficiency, effectiveness, and safety of the Market. Overall succession of portfolio management of Dhaka Stock Exchange Ltd. creates opportunity for the foreign investors to attract foreign investment in share and securities in our country. Knowledge of Dhaka Stock Exchange Ltd. help to contribute to the orderly and healthy development of Capital Market by bringing expertise to bear on structural and policy issues concerning the securities industry.