Stock market

A stock market plays as a strong role in the industrialization and economic development of the country. Among the

developing countries, the contribution of the capital market have lately been recognized.

The capital market in Bangladesh is still at a developing stage. Bangladesh capital market is one of the smallest in Asia but the third largest in the south

Asia region. It has two automated stock exchanges namely

Dhaka stock exchange and Chittagong stock exchange. The Dhaka Stock Exchange (DSE) and Chittagong Stock

Exchange(CSE) has undergone significant changes contributing towards the development of Bangladesh capital market

It is the regulatory body of Bangladesh capital market. SEC Regulating the CSE SEC Regulating the CSE and DSE and DSE

SEC defines working process and rules and policies under which the stock exchanges will operate.

SEC Regulating the CSE and DSE SEC Regulating the CSE and DSE

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Dhaka Stock Exchange (Generally known as DSE) is the main stock exchange of Bangladesh. It is located in Motijheel at the heart of the Dhaka city.

Dhaka Stock Exchange is the first & biggest stock exchange of the country. The operation of Dhaka Stock Exchange started on May 14, 1964 after renaming East Pakistan Stock Exchange Limited.

Dhaka Stock Exchange (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.

In the beginning DSE was a physical stock exchange and used to trade in the open out-cry system. After that to secure smooth, & effective operation on the market, DSE uses automated trading system. The system was installed on 10th August, 1998 and was upgraded time to time.

There are 238 members and total 529 listed

securities in Dhaka Stock Exchange. Every stock market has its indices to show

movements in the market as a whole. In the beginning DSE had only one index. However, now there are two different indices which are DSI broad index and DSE 30.

Chittagong Stock Exchange is the 2nd stock exchange of Bangladesh. It is said that CSE is the pioneer of the modern capital market of the country as it introduces modern technology & sophisticated logistic support.

It was incorporated as a self regulated non-profit organization on 1st April, 1995 and formally opened on November 4, 1995. It started its trading through cry-out system. Then Chittagong Stock Exchange started first automated trading system of the country. CSE started its automated trading on 2nd June, 1998 and internet trading service on 30th May, 2004.

CSE consists of 25 members of whom 12 are elected through election of CSE members, 12 members are elected from different major economic & social arena of Bangladesh and CEO is nominated and appointed by its own board but the approval of SEC mandatory.

Now CSE has 147 members and 250 of listed securities

The Primary MarketThe Primary Market

The primary market deals with newly issued securities and is responsible for generating new long-term capital.

The secondaryThe secondary

The secondary market handles the trading of previously-issued securities, and must remain highly liquid in nature because most of the securities are sold by investors.

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There are four markets in the system -

Public MarketPublic Market Only trading of market lot share is done here through automatic

matching.

Spot Market Spot Market Spot transactions are done here through automatic matching which

must be settled within 24 hours.

Block MarketBlock Market A place where bulk quantities of shares are traded through pick and

fill basis.

Odd Lot MarketOdd Lot MarketOdd lot scripts are traded here based on pick and fill basis.

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0

100

200

300

400

500

600

2009 2010 2011 2012 2013

2009

2010

2011

2012

2013

2014

20092009 415415

20102010 445445

20112011 490490

20122012 515515

20132013 529529

POLICIES OF DSEPOLICIES OF DSE

DSE can introduce automate monitoring systems that may control price manipulation, malpractices and inside trading.

It can make sure all the listed companies publish their annual reports with actual and proper information that can ensure the interest of the investors.

To force the listed companies to declare and pay regular dividends through conducting Annual General Meeting.

To make arrangement to set up merchant banks, investment banks and floatation of more mutual funds particularly in the private sectors.

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POLICIES OF DSE POLICIES OF DSE (Continued)(Continued)

More banks, insurance companies and other financial institutions should be encouraged to deal in share business directly

The management of DSE should be vested with professionals and should not in any way be linked with the ownership of stock exchange and other firms.

To train the investors about fundamentals to deal in share transactions.

To punish the member brokers for breaching of contract.

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Listing of Companies

Providing the screen based automated trading of listed Securities

Settlement of trading

Granting approval to the transaction

Market Administration & Control

Market Surveillance

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Publication of Monthly Review

Monitoring the activities of listed companies

Investor’s grievance Cell

Investors Protection Fund

Announcement of Price sensitive or other information about listed companies through online.

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Stock market crash is a sharp and unexpected decline of stock market prices for a very short period of time, usually accompanied with the decline of many other assets’ prices. It causes significant capital losses of investors and speculators. The market participants become panicked which leads to more losses.

Stock Market Crash of 1987 Stock market crash of 1996 Stock market crash of 2010-11

19thDecember was a historical day of the financial year 2010-11 in Bangladesh stock market. On this day DSE witnessed its biggest one day fall in 55 years history until the date with losing 551.76 points or 6.71 percent

In the mid December, to meet CRR & SLR requirements of BB by the deadline created liquidity crisis in banking Sector and call money rate made a new record of 180%. Investment Corporation of Bangladesh (ICB), state-owned commercial banks (SCBs), regulators and government brought some kind of stability in the market after the big fall of 19thDecember & liquidity crisis. As a result, share prices increased from 20th to until 30th December and index stood at 8290 point at the end of the financial year 2010-11

On 9th January DSE General (DGEN) Index declined by 600 points and all indices declined nearly 7.75 percent. On 10thJanuary Dhaka Stock Exchange General (DGEN) Index lost by 660 points or 9 percent & Chittagong Stock Exchange Selective (CSE) Index declined by 914 points or 6.8 percent within 50 minutes of trading

Role of market regulators and their employees Demutualization of Exchanges Uniform Face Value of Shares Trade in Pre-IPO Placement Misuse of Omnibus Accounts Faulty Asset Revaluation Irregularities in Book Building Method Lack of knowledge of small investor

December Closing of Financial Institutions Serial and Artificial Trading Issue of Right and Preference Shares Suspicious Transaction of Top Players Block Placement Direct Listing

PROBLEMS AND LIMITATIONS OF DSEPROBLEMS AND LIMITATIONS OF DSE

Price ManipulationPrice Manipulation

It has been observed that the share values of some profitable companies have been increased fictitiously some times that hampers the smooth operation of DSE.

Delays of settlementDelays of settlement

Financing procedures and delivery of securities sometimes take an unusual long time for which the money is blocked for nothing.

Irregular payment dividendsIrregular payment dividends

Some companies do not hold Annual General Meeting and eventually declare dividends that do not reflect the real or actual financial positions of the company and ultimately shareholders become confused.

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PROBLEMS AND LIMITATIONS PROBLEMS AND LIMITATIONS (continued)(continued)

Selection of membershipSelection of membership

Some members being the directors of listed companies of DSE look for their own interest using the internal information of share market.

Improper Financial Statement Improper Financial Statement

Many companies of DSE do not focus real position of the company as some audit firms involve in corruption while preparing financial statements. As a result the shareholders as well as investors do not have any idea about position of the company.

Technical problems and political infightingTechnical problems and political infighting

The concept of centralization of securities market has not been implemented that arises technical problems and political infighting.

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PROBLEMS AND LIMITATIONS PROBLEMS AND LIMITATIONS (continued)(continued)

Lack of skilled manpowerLack of skilled manpower

in DSE as well as financial and non financial institutions involved in the securities market.

The lack of proper policyThe lack of proper policy

Absence on framework that provides incentives and protection to investors.

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To force the listed companies to publish their annual reports with actual and proper information that can ensure the interests of investors

To introduce automated monitoring system that may control price manipulation, malpractices and inside trading

To introduce full computerized system for settlement of transactions.

To force the listed companies to declare and pay regular dividends through conducting Annual General Meeting

To take remedial action against the issues of fake certificates

Banks, insurance companies and other financial institutions should be encouraged deal in share business directly.

To punish the member brokers for breaching of contract

THANK YOU