Report on Capital Market in Bangladesh Trends and Practices

Executive Summery

This report is based on the Hazrat Amanat Shah Securities Ltd. (HASSL) the main purpose of the report becomes very clear from the topic of the report.

The main objectives of the report are identifying the scenario of  Capital Market and monitoring their overall performance in the last few years and Hazrat Amanat Sha Securities Ltd narrates the company profile including their products and services, activities and performances. Credit analysis, investment review and handling default investment. Automation system DSE by using MIS and ICT. This report is broadly discuss Bangladesh capital Market and its practices. Where Hazrat Amanat Shah Securities Ltd. A nonbanking financial institute plays the role of brokerage house. Here I have tried to depict the picture of Dhaka stock exchange, CSE, SEC, CDBL and their function, Activities, Mission, Vision objective.

BANGLADESH:  PROFILE

Geographical Location: 20°34’ &26°38’ North Latitude 88°01’ & 92°41’ East Longitude

Area (Sq.km): 147570                             Standard Time: GMT+6 Hours

Population (Mn):  152.6                        Population Density/Sq.Km.,2006

(Estimated): 953

Inflation (2006-07): 7.22%                        GDP (2006-07): 6.51

Per capita national Income (in Tk.) 35904

Capital market in Bangladesh

Bangladesh capital market is one of the smallest in Asia but the third largest in the south Asia region. It has two full-fledged automated stock exchanges namely Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) and an over-the counter exchange operated by CSE. It also consists of a dedicated regulator, the Securities and Exchange Commission (SEC), since, it implements rules and regulations, monitors their implications to operate and develop the capital market. It consists of Central Depository Bangladesh Limited (CDBL), the only Central Depository in Bangladesh that provides facilities for the settlement of transactions of dematerialized securities in CSE and DSE.

History of Stock Exchange

Dhaka Stock Exchange was set up on 28thApril,1954 that started formal trading                   on early 1956.Post–independence government did not promotea capital market during the first five years, and it was activated again in 1976 with 9 issues on board. In 1995, a second bourse, the Chittagong Stock Exchange, was set up with sophisticated logistic support and modern management.

Vision,  Mission, Objectives

i Vision, 

1. Regulating the market structure through proper rules and strict compliance by members.
2. Expansion of CSE trading network to cover 504 thanas.
3. Introduce Book Building system in Bangladesh capital market.
4. Introducing derivative market Continuous promotion of stock investment throughout the  country.
5. Create opportunity to cross border trading with SAFE countries.
6. Introduce Global Depository Receipts (GDR).

ii   Mission

To create an efficient and transparent Market facilitating entrepreneurs to raise capital, so that it accelerates industrial growth for overall benefit of the economy of the country.

iii  Objectives

1. Develop a strong platform for entrepreneurs for raising capital;
2. Provide an investment opportunity for small and large investors;
3. Develop a transparent market ensuring investor’s interest;
4. Provide a fully automated trading system with most modern amenities to ensure: quick, easy, accurate transactions and easily accessible to all;
5. Attract non-resident Bangladeshis to invest in Bangladesh stock market;
6. Attract foreign institutional investors to invest in Bangladesh;
7. Collect, preserve, disseminate data and information on stock exchange;

Management of Stock Exchanges

 DSE & CSE comprises of 25 members of whom 12 are elected through direct election from the 235 and 134 shareholders respectively. Another 12 members representing distinguished personalities from different key economic and social arena of the country. The CEO of the Exchange is also a Director of the Board.

Categorization of listed company

Category: A, B, G, N & Z

 Category                            DSE                       CSE

A                                         155                        130

B                                          18                          13

G                                          1                             1

N                                         13                           14

Z                                          98                            72

Debenture (A category)   8                             2

Treasury Bonds:               75                            –

______________________________________________

Grand total:                     368                          232

Criteria of the share Category

“A” Category Companies: Companies which are regular in holding the Annual General Meetings (AGM) and have declared dividend at the rate of 10 percent or more in a calendar year. (Mutual fund, debentures and bonds are being traded in this category).

“B” Category Companies: Companies which are regular in holding the AGM but have failed to declare dividend at least at the rate of 10 percent in a calendar year.

“G’ Category Companies: Greenfield companies.

 “N’ Category Companies: All newly listed companies except Greenfield companies will be placed in this category and their settlement system would be like Category companies.

“Z’ Category Companies: Companies which have failed to hold the AGM or failed to declare any dividend or which are not in operation continuously for more than six months or whose accumulated loss after adjustment of revenue reserve, if any is negative and exceeded its paid up capital.

Trading System

1.                   ‰Fully automated screen-based.
2.                   ‰Nation-wide online trading network.
3.                   ‰Present coverage : Chittagong, Dhaka, Sylhet, Rajshahi, Khulna, Barisal, Tangail and Coxsbazar
4.                   ‰Continuous expansion.

 Settlement System

 A, B, G and N: T+1 (Pay in day)

                           T+3 (Pay out day)

 Z Category:     T+3 (Pay in day)

                           T+7 (Pay out day)

Spot:                 T+0 (Pay in day)

                           T+1 (Pay out day)

 Foreign trade T+5 (Settlement between buyer and seller)

                      T+6 (Member submit the documents along with custodian bank certificate to the clearing house within 10.00 am)

Function: Securities & Exchange Commission (SEC)

Registering and regulating the business of stock exchanges, stock brokers, merchant bankers and managers of issues, trustee of trust deeds, underwriters, portfolio managers and other intermediaries in the securities market.

Promoting investors’ education and providing training for intermediaries of the securities market.

Prohibiting fraudulent and unfair trade practices relating to securities trading in any securities market.

Functions: Dhaka Stock Exchange Ltd. (DSE) & Chittagong Stock Exchange Ltd. (CSE)

Listing of securities and ensuring compliance by the issuers.

Trading provisions for listed securities through efficient trading platform (Online screen based trading system).

Over the counter market (OTC) & Internet based trade facilities provide by CSE.

Real time online market Surveillance of trading and regular monitoring and compliance inspection of trading operations.

Clearing and Settlement of executed trades.

Management of the Members.

 Functions: Central Depository Bangladesh Ltd. (CDBL)

Operate and maintain the Central Depository System (CDS) of Electronic Book Entry.

Recording and maintaining securities accounts and registering transfer of securities.

Changing the ownership without any physical movement or endorsement of certificates.

Execution of transfer instruments, as well as various other investor services including providing a platform for the secondary market

Trading of Treasury Bills and Government Bonds issued by the Bangladesh Bank.

Supervision of Depository Participant activities.

Market performance of DSE & CSE,2007

Particulars                                                 DSE                               CSE

Member                                                     235                               134

Listed Securities                                       368                                232

Issued Capital (Bl.                                    248.86                          96

Market Capital (Bl

Tk)                                                                804.21                          724.14

Price Index                                               3099.25(Base100)         8514.32(Base 1000)

Total Turnover (mn

TK)                                                             2102.80                            530.10

Market cap. To GDP                               17.20%                              14%

Products in the Market as on 30th March, 2008

TAX RATE ON DIVIDEND

25% Dividend recipient for resident (Individual)

10%

Company at a glance

Report On Hazrat Amanat Sha Securities Ltd. (Hassl)

Hazrat Amanat Sha Securities Ltd.(hassl) is a   leading equity brokerage house in the country with a diverse clientele of institutions, high net worth individuals, foreign funds and retail investors. The Company commenced stock broking activities in 2009 and has over time become the largest stock broking company in the country having developed a strong team of highly skilled and experienced professionals. 

Milestone of Hazrat Amanat Sha Securities Ltd. (hassl)

 Started Stock Broking Business since 2009 through DSE

 Secured 25th position in DSE.

 Inaugurate Integrated Back Office Software System first ever in Bangladesh Capital

Market in 2009.

Software & Information Services (BASIS

 Sponsor Shareholding of Financial Excellence Limited in 2010

Nature of Business: 

The Company extends brokerage services as its core business. Basically the company performs margin loan facilities, research & analysis and provides advisory services to the clients.

Principal products and services:

Hazrat Amanat Sha Securities Ltd.(hassl)  offers various kinds of services all over the country, which includes the followings:

 Brokerage Services

 Trading Facility through NITA (Non Resident Investor’s Taka Account)

 Internet Trading

 CDBL Services

 Research Services

Relative contribution of Products contributing more than 10% of core areas of business:

The Company has associates. However, Hazrat Amanat Sha lungi, Hazrat Amanat Sha sppining,Helal & helal brothers.

Distribution of Products/Services:

Brokerage Services:

1.  “Trade Execution Service” for clients in Dhaka and Chittagong Stock
2. Exchange
3.  Trading of portfolio accounts maintained with the Merchant Banking Division of Hazrat Amanat Sha Securities Ltd.(hassl).
4.  Custodial Services provided for clients for safe custody of securities.
5.  Extend credit facilities through Margin Trading.

Sources and availability of raw materials and the names of the

Principal suppliers:

Raw material for a hassl is fund which is mainly mobilized/ procured from equity Capital, and borrowing from Banks and NBFIs.

Valuation of Company’s Assets & Summary thereof

Investments in Stock Exchange for membership are stated at fair value determined by Ahmad Ahmad and Associated, a financial consulting firm. Fair Value of investment in Stock Exchanges for Memberships are incorporated in the financial statements as in 31.12.2009. Fair Value Measurement Reserve are not available for distribution as dividend to the Shareholders of the company.

Investments for membership are initially recognized at cost (which includes transaction costs) and are subsequently re-measured at fair value based on current quoted bid price (in case of CSE Membership based on current bid price and DSE Membership based on fair market value). Surplus arising from changes in the fair value of investment for membership are transferred to Fair Value Measurement

Reserve (FVMR).

 Interest Rate Risk

Interest rate risk is concerned with debt of short term and long term maturity.

Volatility in money market and increased demand for loans raise the rate of interest. The Company’s financing in different sectors are generally structured at fixed and variable rates for specified terms. Increase in interest rates of borrowings could narrow or eliminate the spread, or result in a negative spread, and hence, may have a material adverse effect on the Company’s business, financial condition and/or results of operations.

Management perception:

The company’s capital structure is mainly equity based financing. The portion of credit from different financial institution will repay from own revenue income.

Exchange rate risk:

Any organization which involved in the foreign exchange bears a huge risk because of the volatility of the foreign exchange rate. If the profit of the organization is related with the foreign exchange then the company bears huge risk.

Management perception:

Hassl’s main income source is revenue through commission which is not directly related to foreign exchange transaction. So volatility in the exchange rate would not directly affect Hassl’s profitability.

Industry Risk Brokerage service industry is an emerging sector with vast local demand for its huge local demand. Competition in this sector is usually based on the customized services that the firms provided.  By providing skilled services and entry of new competitor may increase the market competition and may adversely affect the profitability of the company. Since financial organization is fast growing industry there is potentiality for a well established and growing financial institution to come up with their new window of stock broking business. Recently insurance companies and banks have received approval for inaugurating stock broking business. Around 15 merchant banks are in queue for introducing its business operation. Moreover as long as capital market operation is growing new and existing competitors are sharing single pie.

Major activities and responsibilities that a member maintain with DSE on behalf of investors:

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 & Settlement:

participant trade reporting, affirmation, billing and assigning settlement instructions.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 427 Instruments in Five (5)groups in the Four (4) markets.

A Group: Number of Instruments are 338 (150 + 8D + 22M + 158TB), 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.

Diagram cycle is valid for A, B, G & N category instruments traded in Public, Block & Odd-lot market.

B Group: Number of Instruments are 44(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 0 (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 11(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 34(Trading in Public, Block & Odd-lot Market with trade for trade settlement facility through DSE Clearing House on T+1, T+9 basis). “Z” and “DZ” 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 & Z category instruments of foreign trade.

1. If any instrument declared as Compulsory Spot then Trades of Block and Odd-lot market of that Instrument will be settled like Spot Market.
2.  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.
3. Howla Charge, Laga Charge & Tax are always payable to DSE at T+1 day for both Buyer and Seller traded in Spot Market.
4. Outside-Of-Netted settlement for “A” Group instrument has been withdrawn from 10^th Dec 2006.
5.  DVP Trades are Off-Market Settlement (Broker to Broker).

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.

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. 

 MIS & ICT application of Hazrat Amanath Shah Securities  

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 was started from 21st December, 2008.

Hardware

DSE Automated Trading System (HP NonStop S7806) is running on fault tolerant, high available, scalable and maintainable Mainframe Server. Previously DSE established the TANDEM NonStop K204 System on September 1998 and on August 2005 it was replaced with highly scaleable HP NonStop S7802.

DSE upgraded the Trading System again on 21st December, 2008. The existing HP NonStop S7806 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)

All the Member (238 members) Server Applications (MSA) are connected with NonStop 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 MetroNet 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 a 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.

Three DSE branch offices located at Chittagong, Sylhet and Khulna are connected via BTTB’s DDN link. We also used another connectivity for redundancy for the DDN link. We have a plan to reach the DSE branches in same way.

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 Nonstop 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 NONSTOP 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 NonStop Kernel

DBMS handled by NonStop 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.

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.

Solution Benefits

The TESA application suite derives significant advantages from being implemented on the HP NonStop platform. The HP NonStop 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 NonStop 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 NonStop 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 2K/ XP professional 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.

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.

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.

Booker Support and Other 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.

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.

1. Price Monitorin

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.

Warning to Members 

The department may issue verbal/ written warning to member/s when a market irregularity in the scrip is suspected.

Imposition of penalty/ suspension

The department, through the CEO, imposes penalty or suspend the member/s who are involved

Rumor verification

1. Liaising with Compliance Officers of companies to obtain comments of the company on various price sensitive corporate news items appearing in selected News Papers.
2. Comments received from the companies are disseminated to the market by way of online news bulletin.
3. 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 broker’s 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 scrips, 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, 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.

To upgrade & faster treading system is hardly require in banghladesh capital market that’s why Dhaka stock exchange develop new upgraded software existing  vendor Cambridge Solution Ltd.

A report on The New Application of the Company

On 10thAugust 1998, Automated Trading System was introduced at Dhaka Stock Exchange Ltd. Within this period some of the new features were incorporated like multiple indices, introduced “Broker control over trader module” etc. Further up gradation of hardware in DSE automated trading system was done in August 2005 & continued till 2010. At the same time a major change done in the application software to incorporate facilities to trade from all over the country through dedicated WAN (wide area network) connectivity in branch or main offices of brokerage houses, client cash limit validation by introducing “Broker control over client module” etc.

It is mentionable that there is no facility of Internet trading in the existing trading system of DSE till date. Present TESA architecture supports only the clients application MSA & TWS which are connected through private network links (both LAN or WAN).

But keeping the view to introduce full-fledged Internet trading in future, DSE took the initiative for upgrading existing TESA client application MSA to MSA Plus and a work order was given to the existing vendor Cambridge Solution Ltd. in May 2010. This up gradation will provide platform for enabling Internet trading in near future.

In case of proposed upgraded client software (MSA Plus), basic architecture has been changed; it is now a Web Based Application. The hardware infrastructure for MSA Plus solution in a Brokerage House will consist of an Application Server, a Database Server & a Web Server component instated of earlier restricted single server facilities. In present solution users have to type URL on the web browser instead of clicking the program/software installed in the terminal.

Industry standard API for Broker Order Routing & enabling internet trading will be provided by the vendor as a separate module in next phase after Go-live of MSA Plus project.

The basic benefits/features of upgraded “MSA Plus” Solution are as follows:

1. “Thin Client Architecture’ (web based application) instead of existing Thick Client Architecture (desktop application).

2. Investors would be able to submit order via Internet to the respective broker houses.

3. All workstations, which are now called ‘Terminals’, will be connected to the member web server using suitable browser through network (Intranet / Extranet / Internet).

4. Pre-validation feature will be adopted; this will empower the brokerage houses to revalidate client’s buy (cash limit) and sell (share limit) orders.

5. Instrument’s buy/sell can be restricted individually. Can stop either buy or sell.

6. Intraday graph for price movement of each instrument.

7. BO ID to be made mandatory during client registration. BO ID field will not be allowed for modification.

8. Client type (normal, foreign, dealer, corporate & others) could be defined at the time of client registration.

9. Instrument category & sector parameter has been incorporated

10. No local installation for trader work station will be required, since it is a web based application.

11. Number of Traders per broker will be open.

12. Export / Import facilities with a required new file format based on BO ID & ISIN will be available in MSA Plus to interact with broker’s back office System as well as CDBL.

Note: For feature no 2 & 3; it is recommended to maintain proper security and authentication process by using secured connectivity & infrastructure (like firewall, VPN etc.)

Recommendation and Conclusion

As an office in charge of Hazrat Amanat Sha Security Ltd extenuation office. I want to say inspire of enormous of Bangladesh capital market It has a good prospect in future days. If government, autonomous body SEC and company’s directors, share holder and stack holders of DSE abide all the rules, Regulation and combaindly work to boost up the health of the capital market of Bangladesh. It will play a vital role of country’s industrial sector financing, employment revenue from taxes. Also it will resolve the extra presser on money market interest rate. So all the stack holders of capital market of Bangladesh has to work hard combaindly to boost up countries major financing sector namely capital market of Bangladesh.